This is why altcoin investors should be cautious, despite the recent gains.

As the largest altcoin in the market, Ethereum (ETH) has the potential to reshape investor sentiment towards the altcoin market. However, since January, Ethereum has experienced a significant downward trend, losing 56.6% of its value from a peak of $3,744 earlier this year. The decline in network activity and transaction fees has further reinforced this negative outlook.

ETH/BTC chart | Source: TradingViewThe ETH/BTC exchange rate is currently near the levels of summer 2019. Although there were expectations that the year-end price in 2020 could halt the downward trend, the reality has been different. The ETH/BTC pair still has the potential to continue to fall due to low confidence in Ethereum.

This is not a positive signal for the rest of the altcoin market. Could this be a sign that the altcoin market will also struggle to catch up with Bitcoin (BTC)?

Should investors expect sustainable growth of altcoins?

In the past two weeks, the altcoin market has seemingly recovered positively. The TOTAL3 index, which represents the market capitalization of altcoins excluding Ethereum, fell below 750 billion USD in the first week of April, but has nearly recovered back above this level.

TOTAL3 Chart | Source: TradingviewHowever, the market is still in a downward trend. To confirm the long-term strength of altcoin, it needs to surpass the recent lower peak of 780 billion USD and the peak established in March of 853 billion USD.

Source: Blockchain CenterAt the moment, the altcoin season index is 20, indicating that this is Bitcoin season. If 75% of the top 50 cryptocurrencies have performed better than BTC over the past 90 days, the market can then be considered to be in an altcoin season.

The market is still far from this state.

BTC.D Chart | Source: TradingViewThe dominance index of Bitcoin (BTC.D) tracks the market capitalization ratio of BTC compared to the entire cryptocurrency market. The upward trend of this index over the past two years indicates that altcoins have depreciated compared to BTC, with a typical example being the ETH/BTC pair.

BTC.D has surpassed the 63.8% level, a level that was once support in early 2020 and became resistance in 2021. Now that this level has returned to its role as support, BTC.D has the potential to continue rising higher.

Investors are hopeful for a strong price increase in the altcoin market, based on the profits that some tokens have achieved in the past two weeks, but they are cautious. Even though the short-term outlook seems optimistic, the underlying long-term factors will make any significant price increase for altcoin difficult to achieve.

Disclaimer: This article is for informational purposes only and is not investment advice. Investors should do thorough research before making any decisions. We are not responsible for your investment decisions.

Mr. Teacher