Over the last few weeks, Zcash has been leading the corrections in Bitcoin’s price while XLM has been leading the run-ups.
- Bitcoin shows high levels of correlation with the rest of the crypto market, but different altcoins nark different trends for BTC.
- Zcash (ZEC), for instance, can be used to determine intermediate tops within the market.
- Meanwhile, Stellar Lumens (XLM) has led the uptrend since the beginning of April suggesting that Bitcoin has more room to go up.
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A high correlation between Bitcoin and multiple altcoins is helping to determine where the flagship cryptocurrency is headed next.
A Highly Correlated Market
A glimpse at Coin360’s cryptocurrency map reveals what is obvious to many.
Whenever Bitcoin goes up, most altcoins in the market are also likely to surge. And, whenever the flagship cryptocurrency drops, the other cryptos follow suit.
Over the years, some of the most prominent figures in the industry have argued that the high levels of correlation in the cryptocurrency industry are impeding Bitcoin from achieving its upside potential.
The key indicator for the start of a sustainable bull run is likely a decoupling of asset values from Bitcoin (i.e. Bitcoin’s strength weakens other networks or vice versa). Anything else is just speculation again (maybe we need another bubble to learn more lessons? 😉😂)…
— Vinny Lingham (@VinnyLingham) April 10, 2019
Instead of focusing capital on the only decentralized, trustless, and censorship-resistant cryptocurrency, investors are spread across Bitcoin and various altcoins.
It is not uncommon to see newcomers buying altcoins during market pumps. This behavior has helped strengthen the correlation between Bitcoin and most digital assets.
Indeed, data from CryptoWatch reveals that BTC and the top five altcoins by market cap have an average correlation coefficient above 0.8. This statistical value indicates a strong positive linear relationship between these cryptocurrencies.
While many see the high levels of correlation in the cryptocurrency industry as a negative sign, others have seized the opportunities it presents.
Zcash Leads the Downturns
Each time this privacy coin rises and BTC does not follow, it usually results in a “local top,” said Kabankin. This market behavior began developing earlier this month and since then it has occurred three times.
Around Apr. 9, ZEC began surging as BTC remained flat and what happened next was a correction that was seen across the entire market. The same pattern repeated on Apr. 20, and then again roughly two days later.
While accurate, it is impossible to determine how long this pattern will continue forming.
Kabankin maintains that for the time being, market participants can employ this pattern as a “rare indicator” for determining intermediary tops.
XLM Leads the Run-Ups
If ZEC marks the price drops, Crypto Briefing researched other highly correlated assets to determine whether there was an altcoin that leads the run-ups.
It has become clear that Stellar Lumens (XLM) was the one.
On Apr. 5, for instance, XLM was already up 6.6% by the time Bitcoin began posting green. Five days later, Lumens had already advanced over 5% before the bellwether cryptocurrency entered a bullish impulse.
Today, Stellar managed to surge more than 11% while the price of Bitcoin was down by nearly 1%. However, Bitcoin soon followed XLM further confirming this unexpected correlation.
As Stellar Lumens continues its upward advance, it is reasonable to believe that BTC could advance further up.
An Upswing on Bitcoin’s Horizon
Due to the unpredictability of the market, however, every chart pattern and index must be taken with a grain of salt.
Thus, a look at BTC’s 1-day chart shows that the pioneer cryptocurrency is facing strong resistance ahead that could jeopardize the bullish outlook.
Within this time frame, the 100-day exponential moving average represents the barrier that Bitcoin must cross before further advance.
Turning this resistance wall into support could allow BTC to move towards its 200-day exponential moving average that sits around $7,900.
Conversely, a spike in the selling pressure behind Bitcoin around the current price levels could see it plunge. This drop would see the top crypto find support near the 50-day exponential moving average.
This support barrier is currently hovering at around $7,100.
Bitcoin: Moving Forward
While the technical patterns mentioned above can be used to determine short-term price movements, there are several fundamental factors that paint a clearer picture.
As Bitcoin’s halving event approaches, Google searches for the keyword “bitcoin halving” are skyrocketing. The interest for the pioneer cryptocurrency overtime recently reached an all-time high and it appears that there is more gas in the tank.
Bitcoin’s massive growth in popularity is being noticed by large market players who appear to be accumulating heavily. Data from Glassnode reveals that the number of addresses with 1,000 BTC or more recently reached a two-year high.
“This trend implies that despite an uncertain market environment, whales remain confident that now is a good time to be accumulating BTC, suggesting that they believe there is further room for growth,” said Glassnode.
Now, even Bloomberg analysts are bullish on Bitcoin stating that this year it could transition toward a “quasi-currency like gold.”
Given all the optimism surrounding the flagship cryptocurrency, it seems like it is just a matter of time before it resumes another historic uptrend.