The Exit Strategy

 Introduction 

This article is going to focus on our exit strategy, this means I am going to explain when should we run away with our profits and buy the lambo. If this is the info your are looking this article is the right one for you. When talking about exit strategy these are the charts you should be looking for:

1. BTC Chart - BTC is the king, what ever BTC does Altcoins follow
2. BTC Dominance chart - This chart shows the money flow and is a serious indicator
3. Altcoin Market Cap - This chart shows the money flow for Altcoins

In this article we are going to analyse how the three mentioned charts behaved during previous market cycle. 

What is Bitcoin Dominance?

Below we can see the BTC dominance chart from 2015 to 2020:

Note: Bitcoin dominance is a percentage of the total cryptocurrency market capitalisation attributable to Bitcoin. According to CoinMarketCap, BTC now dominates 55.2% of the market. The BTC price is $58,139.11. Total market capitalization is  $1,966,834,918,015. 

During long-term market shifts, the dominance metric can show whether demand for Bitcoin remains higher than the market average. When market value increases, BTC dominance declines. As Bitcoin grows rapidly, the rest of the market is capable of pumping either at the time of local BTC corrections or when the benchmark is at least slowed down at significant resistance levels [1]. 

Price measures Bitcoin’s popularity. Dominance measures its popularity compared to other cryptocurrencies. Theoretically, this may mean investors are choosing quality. They are scared of the market risk and switch from tokens with less capital to a safer asset. It may also mean growing interest in the sector as a whole, along with the belief that Bitcoin is just the most reliable investment [1].

Below we can see a schematic visualisation on the relationship between BTC and Altcoins:

 

Note: If we divide the total market capital of Bitcoin by the total market capital of all cryptocurrencies and multiply the value by 100, we get Bitcoin Dominance. We can also find the dominance of any coin by doing the same step [2].

Bitcoin Dominance Versus Altcoin Price

When Bitcoin price goes up, the Altcoin prices go down and vice versa. Below we can see a schematic representation on the BTC and Altcoin relationship.

When BTC dominance increases, it means that investors in crypto are looking for a less volatile and safer investment. It is analogous to buying A-list stocks or YEN in forex or gold in commodities. During market uncertainty, investors shift towards less volatile and highly liquid assets like BTC rather than investing in altcoins with low liquidity and market cap. 

History of Bitcoin Dominance

Since the introduction of an additional 10 cryptocurrencies, BTC dominance has been mostly above 50% in terms of market dominance. Until November 2014, BTC dominance was above 90%. After the introduction of XRP, the dominance started falling and reached 78% when XRP dominance was at 13% during the first altcoins season. The dominance of BTC crawled back towards 90% in the beginning of 2016 until ETH got listed across exchanges, which took 13% of the market cap and led the dominance of BTC to drop down to the 70s before it again started crawling back up.

Note: The major drop in BTC dominance was in mid-2017 when Ether became extremely popular and it started looking like it can dethrone BTC. BTC dominance fell to 38% while ETH dominance peaked at 31% in June 2017.

Here is a tabular summary of the relationship between BTC’s dominance, BTC’s price, and altcoins’ price.

Note: When the tabular summary uses the word Stable, it means that the BTC chart price is consolidating or moves side ways.  Now when the BTC dominance increases (meaning investors and traders move to BTC market cap) and the BTC price decreases, means that BTC is being de-evaluated and at the same time market cap is being increased, and this might be a strong indicator of Bull run end.

Crypto Bull Run End

Bitcoin price is losing bullish momentum. Although it has still managed to hold above support at $55,000, after a failed attempt to clear the $60,000 resistance, the trend has been down over the last week. Jiang Zhuoer is the CEO of BTC.Top mining pool, he claimed things might continue to go south during the year. In a recent interview with Wu Blockchain citing “study models”, Zhuoer predicted a change in crypto market dynamics. Bitcoin’s price has seen gains of 824.4% in one year, but Zhuoer believes that between September 2021 and June 2021, the market could move “from a bull to a bear market.” [3]

Below we can see the BTC dominance chart with RSI and MACD oscillators:

Indicator of Bull Run 1:   Above we can see that due to the increase of the Altcoin market cap (there are over 10.000 Altcoins now days), over the time BTC dominance is reduced dramatically. When the price of the BTC starts reducing and the dominance starts increasing, then it is time to hit the road.

Below we can see the Glassnode NUPL chart:

Indicator of Bull Run 2:  Net Unrealized Profit/Loss is the difference between Relative Unrealized Profit and Relative Unrealized Loss. When BTC hits Euphoria, it is time to hit the road.

Below we can see the Glassnode aSOPR chart:

Note: The chart above is using spent outputs to predict bitcoin local lows and tops. The Spent Output Profit Ratio (SOPR) is computed by dividing the realised value (in USD) divided by the value at creation (USD) of a spent output. Or simply: price sold / price paid. This metric was created by Renato Shirakashi. The adjusted SOPR (aSOPR) is SOPR ignoring all outputs with a lifespan of less than 1 hour. 

Below we can see the Glassnode aSOPR chart on 2017 peak:

Indicator of Bull Run 3: Above we can see that there is some lagging above between the aSOPR peak and the big price drop of 10 days.

Below we can see the Glassnode aSOPR chart on 2017 peak zoom in:

Note: Above we can see the indicator hit above 1.08, which is local top top. 

Final Words

It is important to understand that the events will take place in the following order:

1. BTC dominance increases
2. BTC price consolidates
3. Altcoin prices increase
4. BTC price starts droping
5. Altcoin prices keep increasing
6. BTC price starts droping
7. Altcoin price starts droping

Also for the indicators you should be looking:

1. NUPL to hit blue
2. aSOPR to hit above 1.25 to 1.3 or for the risky ones above 1.4
3. Clear reversal of the BTC dominance and price drop for at least 2 weeks.

References:

• changelly.com  [1]
• www.altcoinbuzz.io [2]
  
• www.cryptoalphanews.com [3]