This is a great question! To answer the question, I’m using a few takeaways from my two previous posts (which I’d recommend you to read to get a better understanding of what’s currently going on with the markets):
- What will it take for the altcoins to recover and start to surge along with Bitcoin?
- Will institutional investors start buying into Bitcoin and altcoins?
Having traded the crypto market for multiple years now, here are my biggest takeaways:
- If / when Bitcoin (BTC) sees a massive surge, altcoins suffer as people sell their altcoins to ride the BTC train.
- If / when Bitcoin (BTC) sees a massive dump, altcoins suffer as people sell their altcoins (and BTC) to be ‘safe’ in fiat.
- If / when Bitcoin (BTC) moves sideways for a while, altcoins see more price action and typically this is the time where I like trading altcoins the best.
We’re currently in situation 1. However, now it’s not only ‘retail’ investors selling altcoins to ride the BTC train, it’s institutional investors buying up Bitcoin while not really buying altcoins (yet) as well.
This means a decrease in interest in altcoins, more sell pressure for altcoins, more buy pressure for Bitcoin. As well as, what we’re currently seeing is an increasing interest in Bitcoin while there’s a decreasing selling pressure as more people are holding their cryptocurrency rather than taking profits now. This is why and how Bitcoin has been able to increase so much in value in such a short time.
Why are Institutional investors buying BTC and not altcoins (ETH)?
I answered this question in the Quora post I referred to, to me the answers are:
- Bitcoin is considered the store of value, altcoins are not.
- Altcoins bring in additional risk factors, such as: The project team (exit-scams, experience, execution), (lower) liquidity, different supply models, etc.
Do I think it’s smart to buy ETH right now?
BTC Dominance is currently around a major resistance point. I could see BTC break it if it continues the move upwards >$30,000. This would mean BTC.D is likely to test 75% where ETH and other altcoins will continue to suffer short-term.
I would like to think this is where we see a huge rejection for BTC.D and altcoins start moving. This will however depend on the kind of buyers we’ll see the rest of December and early 2021. As soon as altcoins start moving, I could well see ‘retail FOMO’ start where those holding altcoins will see significant returns.
For now however, I will continue to hold my BTC until a rejection is clear. While slowly increasing the % of ETH in my portfolio.
This post is for informative purposes only, I’m not a financial advisor and I currently do have a position in BTC and Altcoins. I have not been paid for this post, this post is out of personal interest.
