Everyone wants to invest in altcoins, who doesn’t? After the madness of 2021, Altcoins have become the biggest temptation to achieve crazy gains.
However, the path to investment in this particular category is challenging and complex. This is because it is considered the largest part of crypto exposed to high volatility.
These currencies may increase or decrease by 20% over an hour, and sometimes they increase and decrease much more during a single day.
Let us find out how investment in alternative digital currencies can be managed efficiently by monitoring 4 critical indicators.
Why invest in altcoins?
The main reason to invest in altcoins is the crazy gains. We all know that the price of Bitcoin was less than $1 in 2010. But in 2021, the digital currency’s price reached more than $60,000. Therefore, investors always seek a currency that will achieve crazy gains.
This is why new currencies are being sought all the time. At first, Bitcoin was making crazy gains, then it became Ethereum, and finally, it became altcoins.
It is known that altcoins are currently cryptocurrencies other than Bitcoin or Ethereum.
The secret behind the increase in the price of altcoins
The secret behind the increases in altcoins and people’s desire to invest in altcoins is the small size of these projects.
For example, Bitcoin now has a very large market value of more than $700 billion. Therefore, if you put $1,000 as an investment in it, it will not double until its market value reaches $1.4 trillion!
But if you had put that $1,000 in 10 years ago it would have increased many times over. This means that the secret lies in the market value of the project. The smaller the market cap of the project, the more opportunity there is to increase the price.
Today we will talk about how to monitor the performance of the entire altcoin market in absolute terms. Therefore, we will learn how to monitor the performance of this market through four different indicators.
These indicators are all on the Tradingview app and you do not need a paid version to use them. You can use them in the free version of the application.
1. Bitcoin dominance indicator
The first indicator to watch while investing in altcoins is Bitcoin’s dominance. This is simply because Bitcoin is the largest currency in the cryptocurrency market. This currency therefore represents the majority of capital in the market.
Naturally, the more Bitcoin’s dominance in the market decreases, the more capital will go elsewhere. What you want here is to start selling your altcoins when this indicator gets very low.
Currently, Bitcoin’s dominance is approximately 53%. This means that for every billion dollars that enters the market, about half of it goes into Bitcoin. This means that there is not much opportunity for altcoins to grow in this climate.
But watch the image above on the weekly frame and you will notice that there was a severe decline in Bitcoin dominance in 2021. This explains the crazy increases in the market at that time.
For this reason, it is expected that the Bitcoin dominance index will start to decline after it reaches 60%. This means we are very close to crazy altcoin spikes.
2. Indicator for investing in altcoins: ETH/BTC pair
Notice in the chart above how Ethereum is currently performing relatively poorly against Bitcoin. This explains why altcoins are subject to very heavy market selling whenever there is a downturn.
Here the best that can happen is that a bottom is formed at the current point and then the price of Ethereum starts to increase more than Bitcoin.
This will lead to the upcoming altcoin season and that is why we always recommend monitoring this indicator to manage your altcoin investments.
3. Total3 indicator
The Total3 indicator is considered one of the most important indicators that should be monitored in the cryptocurrency market. This indicator is considered a measure of the strength of altcoins, except Bitcoin and Ethereum, in the market, but this also shows altcoins. Therefore, it cannot be relied upon alone.
However, this indicator can be monitored to determine the locations and centers of strength on it. For example, in the drawing above, we notice that there is a strong resistance center at the highest point this indicator reached in August 2022.
This was the last altcoin season that the market was exposed to before the violent decline after the collapse of the FTX platform.
We expect the upcoming Altcoins season after this index breaks this barrier at the $450 billion point.
Altcoins may increase continuously until this indicator reaches the resistance points in April 2022. This point is the last point of increase before the collapse of the Luna coin and its UST dollar.
After this point, we expect this indicator to start forming a new peak above $1.2 trillion.
4. Others indicator
The last indicator is Others. You will notice that this indicator is slightly similar to the previous indicator, but the difference is that it does not include stablecoins.
It also represents the 125 largest currencies in the crypto market, excluding Bitcoin, Ethereum, and stable currencies.
Through this indicator, we can identify the capital that enters altcoins, unfortunately not all of them, but this indicator is still very important.
Notice how this indicator is currently experiencing a very strong increase, as it has crossed the August 2022 barrier, which is a very good sign.
We expect this indicator to rise to April 2022 levels, but it must face strong resistance on the way. The index may undergo a correction first before rising.
We always advise monitoring this indicator to start selling currencies when this indicator crosses the peak and begins to form a new peak, and this time it may reach $1 trillion, and it may also exceed it.
How can these indicators be used efficiently when investing in altcoins?
If you want to use these indicators efficiently when investing in altcoins, you must first monitor them constantly.
Here we recommend monitoring the weekly or at least daily frame. These indicators are not effective in the short term, but only in the long term.
Also, monitor the previous support and resistance areas and the highest and lowest points of each market cycle.
The law here is always that you start selling your altcoins when these indicators especially total3 and others break the previous highs and form new highs.
This means that the market has begun to turn into a stage of extreme greed and therefore it is time to sell.
However, if these indicators fail to achieve new peaks in the next bull market, this may mean that there will be no crazy increases in altcoins
You should also beware that a lot of altcoins may get their full cycle before this indicator. Therefore, it is also important that you monitor your project’s X page to know about important updates for that project…
