Relief Rally for the Bitcoin Dominance Rate Before the Final Drop

Current Support

The Bitcoin dominance rate has been decreasing since May 7, when it reached a high of 68.92%. The decline has been swift, especially after June 21. On this date, the rate validated the 50 and 200-day moving averages (MA) as resistance before dropping sharply. The MAs had previously made a bearish cross, which signaled that the price had already begun a downward trend. At the time of writing, the rate was trading slightly below the 64.2% support area, which has been in place since March. While the rate has fallen below here, it’s possible that it will soon reclaim the level. The current action could, however, be a re-test of the same area as resistance. A look at a lower time-frame is required to determine which will occur.

The short-term chart suggests that such a bounce is likely. The rate has created a triple bottom, which is a bullish reversal pattern. Furthermore, there is substantial bullish divergence on the RSI. This signals that the rate is likely to head upwards and reclaim the support mentioned above. The most likely reversal area would be found near the 0.5 Fib level at 65.16%, or possibly lower, at the 0.382 Fib at 64.85%.

Long-Term Movement & Wave Count

Cryptocurrency trader @Anbessa100 outlined a Bitcoin dominance rate chart, in which the rate will drop all the way to 58%.

The BTCD has been increasing since the beginning of 2018. The move since then occurred inside a five-wave Elliott formation during which the rate followed an ascending support line. It ended in September 2019. The rate has since reversed and is now following a descending resistance line. The end of the upward move was confirmed by a breakdown of the rising support line in February 2020, and subsequent validation of the line as resistance. From here, the rate has likely been declining alongside a W-X-Y correction, inside which the price is in the final Y wave. There is a solid support area at 62%, below which BTCD has not been trading since July 2019. If we project the length of wave W to wave Y, we get a target of 58%, fitting perfectly with that given in the tweet.

On the shorter-term wave count, it seems that the price has completed the first wave, which took place inside an impulse. Therefore, a rate increase is expected, which could take the rate towards 65% before the final decline towards 58%. This fits with the triple bottom pattern.

To conclude, BTCD should bounce slightly before resuming its downward trend.