Emerging Relative Strength in Altcoins

Louis Sykes
February 2, 2023

Excluding price action itself, relative strength has to be the most underappreciated indicator.

It's impossible to outperform if you own assets exhibiting relative weakness.

If a stock is underperforming, there's a reason why. It's not until months after the fact do investors discover the "fundamental" drivers anchoring that stock.

The same can be said for when a stock is outperforming.

Look at it like holding a beach ball underwater. You can feel the pressure on your arms, and when that pressure is released, the ball explodes into the air.

Think about the selling pressure in the market: When the selling pressure alleviates, the stocks showing relative strength tend to be the first ones that shoot higher.

These principles are universal across every market.

Equities, commodities, currencies, crypto, you name it.

I'd especially that this type of relative strength analysis is particularly potent in crypto markets, where these things can triple in a number of days. It's no joke.

From a relative strength perspective, there hasn't been much going on, considering that Bitcoin's been the relative leader.

But this could all be changing...

Our custom altcoin index has carved out a short-term base at its May 2022 lows. This is a perfectly logical area to see altcoins take the baton of leadership.

This shouldn't be a surprise. If this recent move is the real deal, it's only a matter of time before we see this rotation take place.

We've seen it in a few names already.

Look at Fantom, it's been on a tear this week.

I think from a more tactical perspective, we need to see how Bitcoin reacts to retesting all this overhead supply near 25,000.

But we could see a scenario where Bitcoin consolidates while money flows into altcoins. This would be especially likely if equity markets can continue with their recent upside.

In either case, seeing this type of rotation certainly isn't bearish.

Rotation is the lifeblood of any bull market, even in this wild west we call crypto.

Thanks for reading, and please reach out with any questions.

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