Crypto Basics Crypto Metrics

Crypto Money Flow and Market Cycles

Identifying whether the market is in a bitcoin-cycle or an altcoin-cycle is useful because this insight shows where investors are allocating funds and how money could move next. Capital flows across the crypto space in a cyclical pattern – called the Crypto Money Flow (CMF) – which is driven by predictable investor behavior.

Initially, money flows from fiat into bitcoin when investors think that bitcoin is at its market bottom. This inflow increases bitcoin market dominance and kicks off the bitcoin cycle.

Once bitcoin gains in price, investors seek investment opportunities in alts. The price of alts tends to follow the price of bitcoin so the time lag between bitcoin and altcoin price movements lets investors protect holdings from a bitcoin crash by moving money into alts.

When alts peak in value, investors look to cash in on their gains, by moving capital back into bitcoin, fiat, or a fiat equivalent like stablecoins.

When bitcoin’s price crashes, the cycle starts all over again as investors seek to buy back bitcoin at the market bottom.

Knowing this, we can analyze and better understand market dominance.

Dominance Chart

Having covered the CMF, we can now look at how the flow affects bitcoin dominance and ultimately the Bitcoin-Altcoin Cycle .

In this graph, we can see our bitcoin dominance (red), altcoin dominance (dark blue), and stable coin dominance (green). The more capital that flows into bitcoin, the greater that market classes’ dominance becomes relative to the other market classes. Our dominances are: bitcoin (~41.5%), altcoin (~58.5%), stable coin (~9%).  These numbers tell us that this week, more capital flowed into altcoins and stablecoins, while less capital flowing into bitcoin.

The red and blue shaded areas correspond to the Bitcoin-Altcoin Cycle, which identifies where the flow of capital across the crypto space is headed.  We are currently in the Altcoin Cycle (blue), indicating that the majority of capital is flowing into altcoins. 

So, as capital flows across the crypto space, dominance changes and so do the market cycles.

Why Crypto Market Cycles Matter?

Investors who understand the crypto market cycles stand a better chance to maximize their trading profit. If you know how to identify the different stages of the Bitcoin-Altcoin Cycle and anticipate the course of capital flow, you’ll prevent losses from selling or buying at the wrong moment.

Stay prepared to take the most out of each season by having full insight into your portfolio at any given moment. If you’re a diverse investor especially, using a tool such as ACCOINTING’s cryptocurrency tracker to oversee your investments can make a difference by supporting your trading decisions.

The intuitive, easy-to-use app gives you an overview of the the value of your coins, thus helping you identify the right trading opportunities. Our tracker supports many wallets, exchanges and currencies!

If you enjoyed this article and want to read more on crypto metrics, please subscribe to Accointing.com below. For accessible explanations of major crypto topics check out our crypto 101 guide.

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