In 2014/2015 (previous Bear Market) BTC represented more than 80% of the Total Market Cap but today this value is below 60%. Considering this and because we don’t have enough data to create a MRVR ratio for all the major cryptocurrencies (calculated by dividing the Network Value by the Realised Cap), some of them didn’t even exist, we will work with BTC, LTC and DASH using Coimetrics.io.
What we can clearly notice is how the cryptocurrency market dipped without giving much fight probably because we have more experienced traders and investors (fighting less the downside). Something also interesting is how the Market Cap was quite stable above the Realized cap and then we saw what can be consider has the final capitulation (many will disagree on that but looking at the MVRV ratio we can see a strong reaction at the same lows).
Nevertheless the big questions remain the same. Will we go lower? Is this the bottom? Will we see a W shaped bottom or something else? Looking at some patterns on this MVRV Ratio we can expect something different and probably with less downside as we move higher (if we can keep moving higher). In 2015 the Realized Cap was tested 2 times on the way up, before a break (on the third attempt) but on the way down the Realized Cap also was a strong support while in this Bear Market we didn’t saw the same behaviour.
Some new traders/investors will probably focus on USD prices and even experienced traders will sometimes “ignore” other pairs nevertheless we always need to keep an eye on every cross pair available since they all have relevance at some point. Also considering this we may even play with some strange pairs just to find out if any correlation exists.
We could work with many examples but for clarity let’s focus on LTC. In the next chart we can see LTCBTC in yellow and LTCUSD in blue. When BTC is in a Bearish Market for a longer period (2014 and 2018) all alt coins usually follow that price action. Funds move from alts to BTC and fiat currencies (or other stable coins) pushing alts lower and lower but when the trend/market gets Bullish, BTC pairs can enter in correction phases while USD pairs remain quite stable for a longer period. Even in Bull markets the USD and BTC price can fall from time to time but not as much as in a Bear Market. For instance, from July 2015 to February 2017 LTCBTC lost value but LTCUSD consolidated because BTCUSD was slowly increasing in value.
In Bull Markets we have periods when BTC pairs get dormant or lose value because funds start moving/rotating between alts. To understand this rotations we need to look for potential tops and bottoms on cross pairs. Looking at the LTCBTC we can clearly see where LTC lost or gained traction but we also see some interesting things if we use the LTCETH pair (blue line in the chart below).
In fact, we notice an ascending channel on LTCETH for the last two years and also that every time this pair tested the top of the channel LTCUSD started a new consolidation or correction some weeks after.