The Bitcoin dominance rate (BTCD) is in the process of breaking down from an ascending support line that has been in place since the May 19 low.
It is possible that it has reached a local top and will continue decreasing in the near future.
BTCD breaks down
BTCD has been following an ascending support line since reaching a low of 39.66% on May 19. The upward movement continued until a high of 49.14% was reached on July 30.
A downward movement followed shortly afterwards and BTCD decreased below the support line on Aug. 2.
Technical indicators in the daily time-frame are turning bearish. The decrease was preceded by bearish divergence in the MACD. In addition to this, the indicators has given a bearish reversal signal and is close to turning negative. The RSI has just crossed below 50 (red icon) and the Stochastic oscillator is close to making a bearish cross (red circle).
Cryptocurrency trader @Damskotrades outlined a BTCD chart, stating that the decrease is going as expected and indicating a potential breakdown is likely.
Since the tweet, BTCD has resumed its descent and is in the process of breaking down below the line.
The wave count indicates that BTCD is in wave five of a bearish impulse (orange) that began with the Jan. 2021 high.
Furthermore, we can see that it was rejected by the 0.382 Fib retracement resistance level at 49.25%.
The most likely target for the bottom of the entire movement is between 34.23-35.56%. The target is found using the length of wave one (orange) and the 1.61 external Fib retracement of wave four (black).
Relationship to BTC
The relationship between BTCD (green) and BTC (orange) has been positive since July 25. This means that an increase in the price of BTC is causing an increase in BTCD and vice versa.
This is also visible by the correlation coefficient (blue), which has been showing values close to one since July 25, implying positive correlation.
Therefore, the BTC price would have to continue falling in order for BTCD to do the same.