Altcoins eclipse Bitcoin as stock correlation persists, Bitfinex analysts reveal

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Altcoins outperformed Bitcoin (BTC) in early September, continuing a trend that began in late August, according to the latest “Bitfinex Alpha” report. If this trend persists, the crypto market could be set for an upbeat quarter.

Bitcoin price fell 11% in one week to $52,756 on September 6. Meanwhile, the dominance of altcoins outside the top 10 by market capitalization has grown sharply.

Notably, this bucks the usual trend as traders generally liquidate their altcoin positions for Bitcoin or fiat currencies. As Bitcoin’s dominance fell by 1.3% since September 3, the dominance of altcoins outside the top 10 by market cap increased by 4.4%.

“This divergence suggests a shift in investor sentiment and market dynamics where instead of focusing on the relative safety of Bitcoin, investors may be seeing potential value or receiving positive signals from altcoin markets,” the analysts pointed out.

Moreover, this show of strength in altcoins could also be related to the fact that the recent sell-off was caused by exchange-traded fund (ETF) exits and spot selling, the report added.

Historical underperformance near the end

However, the altcoin sector has underperformed Bitcoin on average since the start of 2023. The report uses the relationship between Ethereum (ETH) and BTC (the ETH/BTC ratio) as a proxy for altcoins, revealing that this measure is under 365 days. The moving average and has been in a downtrend since late 2022.

Currently, the ETH/BTC ratio is below 0.042, the lowest point since April 2021. This marks the “Merge” event when Ethereum switched to a proof-of-stake consensus model, underperforming BTC by 44% since then.

However, this trend could be close to a reversal. As Bitfinex analysts pointed out, major cryptocurrencies have underperformed Bitcoin since November 2022, but its dominance could be approaching a local top.

As a result, the current outperformance shown by the altcoin sector could continue during the rallies, which makes for a “very bullish” quarter if macro conditions are better.

Correlation with actions

As for the recent Bitcoin correction, the report suggests that a close relationship with the performance of the US stock market is also to blame, as the S&P 500 experienced its worst weekly decline since March 2023, falling 4.25%.

In addition, last week’s $706 million inflows and spot selling added pressure on the BTC price.

However, Bitcoin’s 5.45% drop was less severe than the S&P 500’s decline, potentially indicating seller exhaustion in the crypto market.

However, while various metrics point to a potential temporary local low for Bitcoin, the ETF and spot market flows will ultimately determine Bitcoin’s trajectory in the coming days.

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