The critical psychological level of $1 trillion for the altcoin market cap hit late last week, and traders continue to press for an advantage. Across the board, the altcoin market is moving higher with Bitcoin (BTC-USD).
However, whereas Bitcoin is only $3,500 away from returning to its all-time high, the altcoin market remains -37% below its all-time high of $1.7 trillion. Additionally, while the moves here for the altcoin market are substantial, there are some warning signs that a pullback is increasingly likely.
Daily & Weekly Charts Signal Warning for Bulls
There are substantial gaps between the candlestick bodies and the 30-day moving average on the Total Altcoin Market Cap daily chart (see image above). Additionally, the last time the 30-day moving average was tested was on February 7, 2023. The Composite Index and Detrended Price Oscillator add support to the overbought analysis because both are at historical resistance levels.
On the weekly chart, similar conditions exist. The daily chart has not tested its 30-day moving average since February 7, but the weekly chart shows it hasn’t been tested since October 23, 2023. Another warning sign is the regular bearish divergence between the candlesticks and the Composite Index (see image above). Indeed, the altcoin market increased in price while the Composite Index decreased. Furthermore, the most overdone level on the weekly chart is the Detrended Price Oscillator, which isn’t near all-time highs but is at the highest level since November 2021.
Beware the Bull
Despite the technicals on the daily and weekly charts showing near-term exhaustion, traders on the short side should exercise caution. Historically, when the crypto market begins a new expansion phase post-bear market, the acceleration and appreciation are rapid.
Just this morning, before the regular opening of the U.S. stock market, $69 million in BTC-USD shorts were liquidated with a nearly equal amount in the altcoin market – meme coin shorts were particularly hit hard. If history repeats itself, there will be a time when fundamentals and technicals will seem like they don’t matter.