The dominance of Bitcoin is on the rise once again, amidst declining momentum in the crypto market. It puts the so-called “altseason” at risk of a falloff as bearish sentiment ensues.

The crypto market remains vulnerable to a sizable correction after a near 50 percent rally since December 2019. Subsequent to 100 percent gains, major alternative crypto assets such as Ethereum, Bitcoin Cash, and EOS have fallen by around 20 percent on average.

Due to various technical structures and fundamental factors such as the inverse head and shoulders (IHS) formation on the daily chart of Bitcoin, open interest in the margin trading market, and the funding rate of perpetual swaps, traders have started to call for a steep percent correction in the short-term.

Fiat inflows into the crypto market primarily come through bitcoin. As such, alternative crypto assets tend to increase only when the price of bitcoin recovers.

For that reason, when the Bitcoin price enters an extended downtrend, the altcoin market typically sees an intensified downside movement with lower liquidity.

Bitcoin in itself is a risk-on asset, and altcoins are even more high-risk than BTC; during a bull market, altcoins often outperform BTC and during a bear market, altcoins are prone to underperform against BTC.

In mid-February, when major crypto assets like Ethereum and EOS were outperforming Bitcoin, the dominance index of BTC was hovering at around 60 percent.

Within less than two weeks, the dominance index of BTC has increased to 64 percent, as investors look to decrease risks of their holdings at the possibility of a market correction.

It remains uncertain if macro events play any role in the price trend of bitcoin or crypto. But, the coronavirus outbreak has had a negative impact on all asset classes across all sectors, regardless of risk-on or risk-off assets.

Gold, for instance, fell along with stocks over the past week, as investors started to panic sell all major assets as a response to rising fear against coronavirus and the possibility of a pandemic. Highly-regarded trader DonAlt said:

“For some odd reason, I don’t think the Coronavirus is bullish for Bitcoin narrative makes much sense. The media talking about a pandemic isn’t going to get people around the globe to buy a speculative asset, it’s going to get them to buy preserved food and face masks.”

In times of uncertainty, risk-on assets tend to perform poorly, and assets that have extreme levels of risk such as alternative crypto assets are unlikely to sustain their momentum in the short-term.

The post Rising Bitcoin dominance may spell the end for altcoin crypto market rally for now appeared first on CryptoSlate.

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