Popular crypto analyst Benjamin Cowen says the historical performance of Bitcoin (BTC) shows that investing in altcoins is risky right now.
In a new video, Cowen said that Bitcoin price action in 2018 gives clues as to what will happen to the altcoin market if the cryptocurrency continues to decline.
“We need to look at what has happened in the past and say what would happen if we made a drop lower. The altcoin market is changing against the bitcoin market. The best way to understand this is to look at Bitcoin dominance [the ratio between Bitcoin’s market cap and other cryptocurrency markets]. Currently the dominance is at the same level as in June 2018 and then the dominance increased… What happened in June 2018? This is where Bitcoin made a lower bottom.”
Cowen says altcoin valuations could fundamentally change if Bitcoin drops lower, and this is likely to happen.
“We don’t know yet if Bitcoin will drop lower but I would say the risk of it happening is very high. If Bitcoin makes a lower bottom, the structure of the market will change completely. This is because the bulls can no longer hold onto the thesis that there is still a bull market as we hit higher lows. Then the bulls need to give some ground and say it’s just a long horizontal phase. Again, they may be right, and it may seem so, but at least in the short term, the argument that this is a bull market may end.”
Cowen points to the parallelism in Bitcoin’s performance now and in 2018, revealing the potential outlook for the BTC and altcoin market.
“Actually, if we hit a lower low, then we should go down and test the bottom of this range, just like we had to go back in 2018 and test the bottom of the $6,000 range. The $30,000 range is similar to the $6,000 range in 2018. Here, the range we kept going down was $6,000, but you could argue it’s closer to $30,000 here, basically the same range. You have $6,000 and $30,000. From here to here the ground has increased by 5 times, but the structure is still somewhat similar.”
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