Analysis of alternative currency dominance against Bitcoin and the impact of monetary policy
As shown in the Others Dominance chart, which represents the dominance of the alternative currency market over BTC, we can observe that on the weekly timeframe, dominance has reached the golden pocket area in the long term. However, there is still quantitative tightening (QT) from the Federal Reserve (FED), which is putting pressure on the markets.
But starting April 2, the Federal Reserve will begin to reduce the pace of Treasury bond roll-offs, decreasing the rate from $25 billion per month to $5 billion per month. This does not mean the end of quantitative tightening entirely, but it is a signal that we are gradually approaching that.
How can the reduction of quantitative tightening affect alternative currencies?
The fundamental question here is: Will this slowdown in QT give a boost to the alternative currency market against Bitcoin?
The possible answer is yes, likely.
We are about to enter April, which aligns perfectly with my expectation that the MACD indicator on the 3-day timeframe will attempt a bullish cross for both BTC and alternative currencies, potentially indicating the start of a new upward trend.
Upcoming forecasts
As monetary policy continues to become more accommodative, I expect alternative currencies to gradually perform better compared to Bitcoin, and Bitcoin dominance to begin to decline. However, we will not see a real 'Altcoin Season' until after:
1. Officially ending quantitative tightening (QT).
2. Further interest rate cuts by the Federal Reserve.
Until then, the movement of alternative currencies will remain slow and gradual, but initial signals show that we are approaching a significant market shift.