Mapping the altcoin market’s next move as buying power falls

• The altcoin market saw a brief period where it outperformed Bitcoin
• Falling Tether reserves pointed towards reduced buying power in the market

Bitcoin’s [BTC] surge to $107.1k, just a stone’s throw away from the ATH at $108.8k, meant the crypto market sentiment was firmly bullish. However, in a post on X, Founder and CEO of Alphractal Joao Wedson noted how sentiment could be a double-edged sword.

Such strong sentiment can signal fresh capital inflows to the crypto market.

However, enthusiastic bulls should temper their expectations. Especially since extended periods of high bullish conviction tend to mark market tops and could trap the bulls.

How well are the altcoins faring?

For a span of five days, altcoins ran amok. This was demonstrated by the Bitcoin Dominance’s fall, as well as the TOTAL2’s rapid hike, which will be explored next. The BTC.D had tested the 62% area as resistance in February and March, and breached this zone convincingly in April.

After hitting a local high of 65.38%, it dropped as low as 61.89%. This drop in the BTC.D implied that the altcoin’s market cap grew faster than BTC.

Over the past five days, Bitcoin Dominance has recovered though – A sign that a full-fledged altcoin season was not in play.

The altcoin market cap excluding Bitcoin saw a retest of the $1.17 trillion-mark. Like the BTC.D, the TOTAL2 can also be subjected to technical analysis. In fact, we can see that the altcoin market cap was on an uptrend, but faced stiff resistance near its February highs.

A move beyond $1.31 trillion will hearten altcoin investors.

However, the Tether reserve metric flashed a warning signal. As the market’s most popular stablecoin, a hike in USDT reserves would imply higher buying power in the market. In other words, it would be accompanied by strongly bullish market conditions.

Since mid-March, the Tether reserves have been dwindling. This reflected reduced buying power, at a time when BTC was near hitting old and new ATHs. The last time such a decline in Tether reserves occurred was back in June-July 2024.

In just over a month, the altcoin market cap fell $275 billion – A 23.5% drawdown at that time. From February to April, the altcoin mcap has fallen by 30%. Finally, it seemed unclear if the Tether reserves would continue to decline – An interesting factor to keep an eye on.