When the crypto momentum starts running hot for bulls, there is often a lot of angst around two main questions: Should I focus on trading BTC or Alt coins? And which alt coins should I focus on? To help answer these questions, I watch the BTC.D dominance chart as well as individual alts divided by BTC on TradingView.

Example: SOL/BTC - Weekly Chart

Bitcoin vs Altcoins Relationships

If BTC.D is going up, generally it means one of two things:

  1. BTC/USD is outperforming Altcoins as a bull
  2. BTC/USD is not dropping as hard as Altcoins
Infographic: Visualizing the Bitcoin vs Altcoins relationships

General Considerations

Generally, there will always be at least a few alt coins out performing BTC even if dominance is going up, but what we care about is the market as a whole to help better gauge our focus as traders. Alt season refers to a period in crypto markets when BTC.D (which shows Bitcoin dominance) is dropping and the crypto space is going up. This means bulls are focusing on alts, and it is a part of the cycle where things can get “nutty” in terms of % moves. Many people speculate that the ETF move on BTC will diminish alt season returns this cycle, as those positions will not be able to as easily sell, and rotate elsewhere, but that remains to be seen.

In bull markets, we also watch for BTC/USD to form sideways ranges of consolidation after a breakout. This is often a period of time where alt coins see some rotation and play catch up as laggards. Ideally it is on a longer term time frame like the 12H or the daily. Keep an eye out for healthy BTC equilibriums following breakouts, as well as a BTC.D chart dropping to know the market is focusing on alt coins for a period of time.

Narratives are also important to know which altcoin sub-sectors to focus on. Memes? Metaverse? AI? Recently, the narrative has been AI with names like RNDR and FET out performing, thanks in part to the semiconductor monster moves of NVDA and peers in the stock market. Try and find the strongest name in the sector, with notable volume, and watch for rotation from it into its peers.

As far as individual altcoins, bulls want to see their BTC pairings in strong up trends, breaking resistance and performing much like the USD pairing. This shows us relative strength, and generally means we will not consolidate as significantly as BTC/USD and will go up more each leg up. I have referred to this in the past as “The spotlight” meaning the coins that have ALT/BTC charts and ALT/USD charts in the same strong uptrend deserve extra attention.

Final Thoughts

It is important to remember, when the party stops, the Altcoins will generally have much deeper pullbacks than BTC/USD. One of the badges of honor of experience for many crypto traders is experiencing a 90%+ drawdown in a coin, and learning the painful lessons about bag holding!

Please also check out the video below where we discuss some of our personal learning experiences on this subject, plus useful tips on how to avoid becoming a bag-holder and how to manage it, should you ever find yourself in that situation.

Avoiding Bagholding In Trading
Avoiding Bagholding In Trading