The cyclical changes of BTC and altcoins became perplexing after the BTC ETF was approved. During several surges in BTC, the expected altcoin season never materialized. From April to September 2024 and January to March 2025, when BTC underwent a 30% retracement, with the exception of XRP/SOL/BNB, almost all altcoins experienced a 'return to where they came from'. We will look at the relationship between BTC and altcoins through a series of four articles on the topic.
(The relationship between BTC and altcoins (1) Detailed explanation of BTC during the 2020-2022 cycle)
(The relationship between BTC and altcoins (2) Operating patterns of altcoins and BTC during 2020-2022)
(The relationship between BTC and altcoins (3) Comparison of BTC and altcoins in Q2Q3 2024/ Q1 2025)
(The relationship between BTC and altcoins (4) The best period for selecting and entering altcoins)
First, let’s briefly popularize some technical theories.
A complete shape requires going through four phases (as shown above ↑);
1: A complete wave of increase, as shown in '1' in the image.
Point X: It is the starting point; finding the starting point is crucial, as it relates to the chosen cycle. Point A: Point A is a complete segment of the upward trend from the start. Once Point A is formed, Point B is found through segment XA.
2: Retracement period, as shown in '2' in the image.
Point B: It is the retracement point of segment X-A. The specific extent of the retracement must be determined based on macroeconomic expectations, changes in the US stock market, and events related to BTC itself. Those familiar with this technical school may directly say the retracement will reach key levels such as 38.2/50/61.8, but at the monthly level, the distance of each point can differ by about 15%. Therefore, determining Point B is not dependent on technical theory but rather on the impact of economic/events on the downward trend's space, which requires solid macroeconomic and fundamental knowledge.
3, Second wave of increase, as shown in '3' in the image.
Point C: Point C depends on the retracement distance from Points A-B. The point of retracement should not only rely on technical theory but more on the macro environment and fundamentals. Whether Point C can break through the previous high also depends on macroeconomic expectations, changes in the US stock market expectations, and events related to BTC.
4, Downtrend, as shown in '4' in the image.
Point D: The target point D of a complete downward trend is relatively easy to determine based solely on technical theory, as it can be found. During the entire downward trend, there will be rebounds followed by declines, and the degree and timing of these rebounds are still determined by the macro background and the fundamentals of the asset. Technical theory often only addresses the spatial issue of 'where to where', but determining the 'time' of reaching that space is more important. One can profit merely based on space, but the uncertainty is very high. This is a reflection of my previous learning of technical theories and also the reason I decided to study macroeconomics and fundamentals.
(The relationship between BTC and altcoins (1) Detailed explanation of BTC during the 2020-2022 cycle)
The causes of bull markets in financial markets must be predicated on good macroeconomic data. Sustained GDP growth, a stable labor market, strong consumer demand, expansion in manufacturing and service industries, and stable inflation form the foundation of prosperity. Coupled with loose monetary policy and corporate profit growth, this creates ample global liquidity and a high market participation sentiment, thus fostering the phenomenon of a 'bull market'.
This round of the BTC bull market is based on unprecedentedly loose monetary policy during the pandemic, with interest rates lowered to 0%-0.25%, and QE purchasing bonds without limit, injecting massive liquidity into the market, with M2 expanding crazily over 25%; during the pandemic, positive impacts were far-reaching in industries like remote work, cloud computing, and electronic consumption. In 2021, the overall profit of technology stocks surged, and BTC was highly correlated with tech stocks, maintaining a similar trend to the Nasdaq 100 at that time. Tech stocks drove large capital to embrace 'decentralized technology', leveraged assets began to flourish, a large number of derivative trades, borrowing for mining emerged, and DEFI exploded. The concept of BTC as digital gold was accepted, transforming from 'speculative coin' to 'institutional-grade asset'.
From the perspective of the technical theories I have practiced over many years, BTC underwent a complete cycle, starting from August 2020 to November 2021, lasting 427 days, with an increase of 600%, 61 weekly candlesticks; the entire cycle is divided into four phases.
Phase 1 (Uptrend): From August 2020 to April 2021, lasting 217 days, with an increase of 558%, 31 weekly candlesticks.
Phase 2 (Retracement period): From April 2021 to July 2021, lasting 98 days, with a retracement of -54.87%, retracing to the 61.8% golden ratio position of the previous market, with 14 weekly candlesticks.
Phase 3 (Second wave of increase): From July 2021 to November 2021, lasting 112 days, with an increase of 135%. The increase is at the 113% level of the golden ratio retracement from April 2021 to July 2021, with 16 weekly candlesticks.
Phase 4 (Downtrend): From November 2021 to June 2022, lasting 217 days, with a decline of 74.48%, 31 weekly candlesticks.
Due to the extensive content, it is explained in four articles. Next is
(The relationship between BTC and altcoins (2) Operating patterns of altcoins and BTC during 2020-2022)
(The relationship between BTC and altcoins (3) Comparison of BTC and altcoins in Q2Q3 2024/ Q1 2025)
(The relationship between BTC and altcoins (4) The best period for selecting and entering altcoins)
I hope that friends passing by can provide guidance and exchange ideas...