Cryptocurrency analytics firm Alphractal has expressed concern about the current state of the altcoin market, noting a period of underperformance in the short to medium term. According to the firm, Bitcoin’s (BTC) dominance continues to rise despite the decline in its price, which suggests that funds are shifting from altcoins to BTC or stablecoins.
Alphractal’s analysis highlights that ongoing correction cycles are typical during Bitcoin bull runs. Historically, altcoins often lose a significant portion or even all of their recent gains during such periods. While Bitcoin maintains higher price levels, many altcoins struggle to maintain their previous highs, leaving the market more vulnerable.
Highlighted by Alphractal, December has traditionally been a month of market indecision and volatility. The firm pointed to December 2020, when XRP lost all of its gains in November, only to recover months later in February 2021. These price movements are often attributed to market makers creating downward pressure to liquidate positions, triggering stop-loss orders, and instilling fear, potentially setting the stage for a new rally.
Given the short-lived nature of altcoin bull and bear cycles, effective risk management is important, Alphractal said. “Diversifying across BTC, altcoins, and stablecoins is crucial to mitigate risk and capitalize on opportunities,” the firm said, urging traders and investors to remain cautious and vigilant during this period of market uncertainty.
*This is not investment advice.