Altcoins show resilience amid Bitcoin dip, Bitfinex analysts reveal

Share this article

Editor’s Note: This article has been updated to correct the timing of Ethereum’s Merge. The original version incorrectly implied that the Merge occurred in April 2021.

Altcoins outperformed Bitcoin in early September, continuing a trend that began in late August, according to the latest “Bitfinex Alpha” report. If this trend persists, the crypto market could be set for a bullish Q4.

Bitcoin’s price dropped 11% in one week, reaching $52,756 on September 6th. Meanwhile, the dominance of the altcoins outside the top 10 by market cap sharply rose.

Notably, this contradicts the usual trend, as traders generally liquidate their altcoin positions for Bitcoin or fiat currencies. As Bitcoin’s dominance fell 1.3% since Sept. 3, the dominance of altcoins outside the top 10 by market cap rose 4.4%.

“This divergence suggests a shift in investor sentiment and market dynamics where, instead of flocking to the relative safety of Bitcoin, investors might be seeing potential value or receiving positive signals from the altcoin markets,” the analysts pointed out.

Moreover, this display of strength by altcoins could be also related to the fact that the recent sell-off was caused by exchange-traded funds (ETFs) outflows and spot selling, the report added.

Historical underperformance close to an end

Yet, the altcoin sector has been underperforming Bitcoin on average since early 2023. The ETH/BTC ratio, used as a proxy for altcoin performance, has plummeted to levels not seen since 2021. Since the Merge, when Ethereum switched to proof-of-stake, ETH has notably underperformed against Bitcoin.

However, this trend could be close to a reversal. As highlighted by Bitfinex analysts, major crypto have underperformed Bitcoin since November 2022 but its dominance might be approaching a local top.

As a result, the current outperformance showed by the altcoin sector could keep going during upsides, which sets up a “very bullish” Q4 if macro conditions are better.

Correlation with equities

On the recent Bitcoin correction, the report suggests that a close relation with the US equities market performance is also to blame, as the S&P 500 experienced its worst weekly decline since March 2023, falling 4.25%.

Additionally, the $706 million in outflows last week and spot selling added to the pressure on BTC’s price.

However, Bitcoin’s 5.45% decline was less severe than the S&P 500’s drop, potentially indicating seller exhaustion in the crypto market.

Nevertheless, while various metrics indicate a potential temporary local low for Bitcoin, ETF and spot market flows will ultimately determine Bitcoin’s trajectory over the next few days.

Share this article