No ‘AltSeason’ Until Bitcoin Breaks $20K, Says Hedge Fund Manager

“When AltSeason 2?” has been on the minds of many investors for some time now. The average retail Joe Schmoe investor most likely draws some insight from crypto-sector leaders and Crypto-Twitter influencers who often post compelling charts of various digital assets with a captioned explanation of why or why not certain price action could lead to a particular outcome. 

To review, here what many investors may have internalized as truth: 

When Bitcoin (BTC) price consolidates (trades sideways) traders will take their profits and begin to play larger-cap altcoins, this catalyzes similar movement across other altcoins and could spark an altcoin rally. As Bitcoin price notches new 2019 highs, larger cap altcoins from the top-10 will move in tandem. A significant drop in Bitcoin market cap dominance will put the ball in altcoins’ court. 

So far, none of these things have happened. In fact, the situation for the majority of altcoins has gotten even worse. 

To gain more clarity on this situation, Cointelegraph decided to ask a professional fund manager to explain what is going on with the crypto sector and why altcoins haven’t followed Bitcoin as they did in the past. 

Cointelegraph spoke with Cantering Clark, a hedge fund manager and co-founder of Blockroots, to pick his brain about the general state of the market and whether altcoins will recover.

Cointelegraph: Bitcoin has had some periods of range-bound trading since topping out at $13,800. In your opinion, why haven’t we seen traders take advantage of this consolidation to jump into altcoins? Also, what exactly is “altseason” in your opinion? 

Cantering Clark: Altseason was essentially a bunch of new investors entering the crypto space, drawn in by Bitcoin. They saw Bitcoin as being very expensive and the perception at the time was cheaper altcoins are going to be future Bitcoins in the making. 

Newer investors were relatively ignorant of market cap and multiplier effects, they just saw the smaller price and equated a cheaper price to a better deal. 

In my opinion, altcoins were the epitome of the bubble for 2017 and the process closely mirrored the Gartner Hype Cycle. 

Bitcoin is essentially the chosen asset by the industry and it has become the haven of crypto. When Bitcoin does well there are flows that can be capitalized on but this flow cycle has begun to untether and fall apart. 

The inverse correlation and positive correlation is no longer a conventional occurrence that investors can consistently rely on. 

“Bitcoin price hasn’t broken it's all-time high, and the next altseason is unlikely to occur until this all-time high is broken.”

CT: Shouldn’t a drop in Bitcoin dominance lead altcoins to surge? 

CC: If Bitcoin’s dominance rate dropped to 40% this would probably bring on an altseason but it's unlikely that this sort of dominance shift is in the cards at the moment.

CT: Do you think investors’ confirmation bias impacts Bitcoin price action? For example, many investors believe that if Bitcoin must drop below the 61.8% Fibonacci retracement level before a real bull market begins. 

CC: Bitcoin is so volatile and it has been through every asset scenario possible. Moving averages are useful because traders make them useful. 

The collective effort of traders makes the necessity of Bitcoin revisiting any price more “likely” thanks to the groupthink. Fibonacci retracements work because we make them work and we place bids and asks on the order book accordingly. Basically, nearly all resistances and supports are based on this thinking. 

A revisit to the 61.8 Fib level diminishes the likelihood of us going way back up because it demonstrates that buyers are reluctant to step in and purchase at a higher price, or before that price is reached. 

As for Crypto-Twitter, there is a deluge of cognitive biases to be found there every day. We should work to avoid confirmation bias and this is why I suggest reading Thinking Fast and Slow by Daniel Kahneman.

CT: Tell us about what led you to invest in cryptocurrency. 

CC: I was drawn to crypto primarily because of the volatility. 

CT: Give us your best explanation of how leveraged trading works and how one can use it to their advantage. 

CC: In crypto, people use leverage to amplify gains through greater capital exposure. More often than not, traders take on losses because they don’t truly understand how margin works and what it is truly designed for. 

Margin/leverage mitigates counterparty risk, and this is especially beneficial for crypto. With leverage, if I own 1 BTC, I can keep 90% of my BTC in a cold wallet and just put 10% of the BTC on exchange and protect myself from counterparty risk. 

Leverage also gives the opportunity to trade both sides of the market. Frequently, traders use too much leverage and get liquidated as the market moves against them but a healthy amount of leverage gives the opportunity to take advantage of market trends. 

2x and 3x leverage allows one to play the trend, especially when Bitcoin is in a strong trend with clear support and resistance levels. 

CT: Tell us a little about Blockroots? 

CC: Our main objective is to educate new traders and separate the truth from the noise. There are a ton of paid groups and these are not always the best way for new traders to learn how to understand the basics of investing. 

One of the troubling aspects of the cryptocurrency market is there are so many trading groups and newbies who copy the trading systems proposed in paid groups a kind of taking a shot in the dark. New traders really aren’t fully aware of how effective these trading systems are they don’t have transparency regarding the trader’s success rate. Blockroots provides an academic, base-level trading approach to help new traders find their way. 

The interview was edited and condensed.