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October 3, 2022
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Crypto market capitalization reaches US $ 883 billion

The bull run was fueled mainly by the strong momentum of Bitcoin (BTC) and Ethereum (ETH). Although many alternative cryptocurrencies have lagged behind BTC, Ethereum has been one of the few that are behind BTC’s bullish trend.

After bullish, sentiment around the market remains mixed; some analysts say that a local top probably formed. Others believe that an alternative cryptocurrency (altcoin) season is emerging.

How would another season come?

If the price of Bitcoin is corrected drastically, the probability of another season decreases dramatically.

Altcoins typically recover when Bitcoin consolidates after a big spike. This pattern generally occurs because, when BTC stabilizes, investors generally seek to make more risky moves in the crypto market.

Traders can buy or sell Bitcoin with leverage, but when there is low volatility, the financing rate can be costly.

The rate of financing of futures is a mechanism that exchanges use to prevent the market from oscillating strongly for buyers or sellers. Therefore, if there are more buyers on the market, buyers will have to encourage sellers through a financing fee every eight hours.

As such, when Bitcoin consolidates, the altcoin market tends to see an increase in volume.

Some traders believe that Bitcoin may reach a temporary peak in the near future. A peak does not necessarily mean that a deep correction must occur. The BTC can consolidate and demonstrate low volatility when starting to prepare for its next run.

Michael van de Poppe, a full-time broker at the Amsterdam Stock Exchange, said the likelihood of a temporary Bitcoin top is increasing. If that happens, altcoins are likely to recover, the trader said:

The likelihood of a temporary top is becoming significant at this point. #Bitcoin falling intraday after hitting the second target, while Ethereum is bouncing up heavily on the $ BTC pair. This is great news for altcoins in general.

IMAGE 01 – The price of Bitcoin with key levels. Source: Michael van de Poppe, BTCUSD at TradingView.com

Likewise, another trader known as “Altcoin Psycho” stated that the story suggests that a Bitcoin spike at current levels is becoming more likely.

The “reversal clouds”, which is a momentum indicator that identifies the main areas of resistance and support, show that the BTC is approaching its ceiling. The trade explained:

Tied 90% of my cryptocurrencies here. I have no idea what’s going to happen next. But, what I can say is that the last time that $ BTC stood out above the reversal clouds was at the top of 2018. Again, I have no idea what happens next. I am not selling. But, I am more than happy to tie the profits here.

Cryptocurrency market capitalization may continue to increase, but there is a variable

However, there is an important variable that can decide whether another season will thrive in the short term.

If Bitcoin starts to correct abruptly without consolidating, altcoins could see intensified movements to the negative side.

Source: CryptoSlate

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