If you’re an avid crypto native wanting to keep track of the health of the crypto market, then be sure to keep tabs on these three charts.
Covered:
- Ethereum vs. Bitcoin (ETH/BTC)
- Bitcoin Dominance (BTC.D)
- Dollar Index (DXY)
We were/are prepared for the yearly red candle bear market, we will be prepared for the next bull run. #bitcoin
– Lower yellow is $21,434 📉
– Upper yellow is $117K 📈"Lesser to the upside, lesser to the downside?" – me 4 months ago pic.twitter.com/O0SbWtrGJk
— Jesse Olson (@JesseOlson) April 22, 2022
It’s down to the wire for Bitcoin and the overall crypto market. With nearly every move to the upside or downside, sentiment appears to be shifting from bull to bear like the day before never even happened. With emotions running high across the crypto space, it’s important to take a step back and see the bigger picture. Let’s take a look at three key charts to refer back to when measuring the health of the crypto market.
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Ethereum vs. Bitcoin (ETH/BTC)
The first chart to take note of is the ETH/BTC chart. Ethereum (ETH) against Bitcoin is essentially a “risk index” because it tends to track the overall sentiment of altcoin investors and traders during market cycles — when ETH is in an uptrend, investors are more likely to branch out on the risk curve, whereas a downtrend typically indicates a risk-off environment. In bullish times, that’s when you see the worst altcoins of the bunch mooning, as traders feel comfortable throwing their money into just about anything in an up-only market. On the contrary, bearish times send everyone flocking back to the most conservative bets like Bitcoin, and Ethereum tends to struggle against it as a result.
If we take a look at the ETH/BTC chart today, it’s rather surprising to see how well the second-largest crypto asset is holding up against Bitcoin with so much uncertainty amongst traders.
After bottoming out in mid-March, ETH has been steadily climbing back higher against Bitcoin, something you don’t tend to see during a true bear market.
Additionally, it’s currently in the midst of confirming a bullish divergence on the daily timeframe, which could serve as an indication of further appreciation to come.
Bitcoin Dominance (BTC.D)
The next chart that essentially serves an an “altseason” indicator is Bitcoin dominance. This chart, as the name suggests, measures Bitcoin’s overall dominance against the crypto market.
When it’s rising, that can mean two things:
- Bitcoin is rallying faster than any other coin, leaving the competition trailing behind in an upwards trend
- Bitcoin and the crypto markets are falling, and investors are allocating capital from altcoins back into BTC as it is the safest and most stable crypto asset
When BTC.D is falling, however, this is actually a good thing — it tells us that altcoins, in general, are outperforming Bitcoin, meaning that investors are remaining confident in the crypto market’s health.
Let’s take a look at what BTC.D is doing today.
On the weekly time frame, Bitcoin dominance has actually been dropping since mid-March, in-line with ETH’s rise against BTC. It’s rather interesting to see considering all the bearish talk in the markets over the past few months — altcoins have been gaining strength for some time now.
Of course, we could see a sharp reversal that sends BTC.D higher if things truly do go bearish, but the dominance chart is suggesting quite the opposite as it stands today.
Be sure to keep tabs on this one throughout your crypto journey — it’s a great “bird’s eye view” of Bitcoin’s performance relative to everything else.
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Dollar Index (DXY)
Lastly, the DXY is a great chart to gather insight as to why Bitcoin and crypto may or may not be performing well. When the DXY goes up, that signifies that the US dollar is gaining strength relative to all other currencies, which tends to happen during global risk-off periods as people flock to the most “stable” fiat currency.
An uptrend in the DXY historically correlates with a downtrend in crypto, which makes sense, as people leave the risk-on asset class of crypto to more risk-off security in spendable cash.
In a DXY downtrend, however, crypto historically rallies to new heights as the global market diversifies into risk-on assets.
So what does the DXY look like today? And how does that compare to the crypto markets?
As you can see, the blue uptrend in the DXY tends to correspond with a downtrend in Bitcoin. Whereas red downtrends in the DXY correlate with a strong uptrend in Bitcoin. Throughout the past year or so, the DXY has been ripping to new highs while Bitcoin and crypto have struggled to make any significant moves.
If you’re a crypto bull, you’ll want to see the DXY roll over in the coming months to solidify an uptrend in crypto and risk-on assets in general. So keep this chart in your back pocket for monitoring the health of the crypto market.
The post Use These Charts To Measure The Health Of The Crypto Market appeared first on CryptosRus.
