Altcoins plunged sharply on February 14th after the price of Bitcoin (BTC) hit a new all-time high above $ 49,000.
The timing of the decline in the altcoin market was noteworthy as it was corrected as BTC rebounded, which it usually does not.
Why exactly did Altcoins crash?
There are two main reasons why the altcoin market has retreated despite the strength of the dominant cryptocurrency.
First, when the price of Bitcoin hit a new record high, it sucked out most of the volume in the cryptocurrency market. This, of course, caused the market to fluctuate towards BTC and contributed to the retreat of altcoins.
Second, Ether (ETH), which often leads the dynamics of the altcoin market, fell sharply against Bitcoin.
BTC / USD vs. ETH / BTC (orange) 1-hour candle chart. Source: trade view
The combination of these two factors coupled with the uncertainty surrounding Bitcoin at a resistance level of $ 50,000 has increased selling pressure in the altcoin market.
A pseudonymous trader named “Kaleo” emphasized that predicting the Bitcoin rally to $ 50,000 would be straightforward.
However, whether BTC goes beyond $ 50,000 remains an important question that would determine the direction of the short-term price cycle in the crypto market. He said:
“This move to just under $ 50,000 was incredibly easy to spot. The real question is what happens next. I tend to consolidate briefly and break out of the realm but I’m undecided. How long it will take? Is it rejected? Idk. “
If Bitcoin first consolidates before theoretically breaking out of $ 50,000, that trend would likely benefit Altcoins for the foreseeable future.
During a Bitcoin uptrend, altcoins tend to rise as BTC consolidates after an initial impulse rally. However, when BTC recovers or sees a slight decline, altcoins often see sharp price drops against both BTC and the US dollar.
Bitcoin is bullish for now, which is helpful for alts
Bitcoin is currently maintaining its bullish market structure, which would ease the selling pressure on the altcoin market somewhat in the foreseeable future.
Scott Melker, a cryptocurrency trader and analyst, said Bitcoin continues to see consecutive bull flags.
Bitcoin Bull flag. Source: Scott Melker, TradingView.com
Bull flags are a market structure in technical analysis that arises when the asset breaks out after a consolidation within an area.
This typically shows a stair-like rally that is sustainable over the long term. Milker said:
“Little bull flags everywhere. Finally closed over $ 48,200 after 7 rejections. Consolidation below resistance usually results in resolution. “
As long as Bitcoin is defending the newly established support area of $ 48,200 and consolidating between $ 48,200 and $ 49,700, another breakout is more likely.
If Bitcoin breaks out again this time around, the altcoin market is likely to rebound along with Bitcoin after BTC’s initial momentum rally recorded an initial decline.