After two full years of bear market and a recent breakout in the altcoin market, crypto analysts believe that an alt season is just around the corner.
However, the altcoin market forms the most dangerous pattern in the crypto space – and one that has made the market plunge to new lows in the past.
Altcoin market forms descending triangle
Many altcoins have exploded in the New Year and have seen insane rallies that in many cases resulted in an ROI of more than 100%.
Altcoins that greatly outperform Bitcoin have led some of the top analysts in the crypto industry to conclude that an alt season is near – a long period of time with alternative crypto assets far outperforming Bitcoin in returns.
Related reading | Past crypto cycle highlights altcoin’s underperformance, but the perfect storm is coming
And while there is no denying that altcoins look exceptionally bullish and even have the strongest increase in trading volume in the entire history of the market, the altcoin market has formed the most dangerous and accurate chart pattern in the cryptocurrency space: the descending triangle.
A massive two year long descending triangle is clearly visible on weekly time frames. Descending triangles can be bullish, but favor a breakdown on the downside.
Such a massive collapse of the descending triangle would have a devastating impact on the altcoin space and the larger crypto market.
Targets are measured by taking the widest point of the triangle and applying it to the breakout point.
In the altcoin / BTC graph below, such a goal would wipe out nearly half a decade of progress and growth in the altcoin market. Since the chart weighs altcoins against bitcoin, it would suggest that most of the lost capital from altcoins would go straight into the leading cryptocurrency by market cap.
The Gann Double Band indicator has just issued the first short signal in the history of the Altcoin / BTC chart in weekly time frames to add even more credibility to a potential decline.
Past Bitcoin failures provide an example of potential danger
To demonstrate the severity of these patterns and signals, Bitcoin has formed two large descending triangles over the past two years, each of which has slumped to new lows.
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In the graph below, each triangle resulted in a dangerous decline in cryptocurrency to new lows, which is an example of what to expect in a decline in altcoins when the pattern shows up.
The same Gann double-band signal on Bitcoin monthly charts issued two short signals during the bear market, each of which occurred at a high touching the upper trendline of the descending triangle pattern.
Why Altcoins Might Be at Risk, aside from the education and signals themselves, speculative assets are by far some of the riskiest assets and investments. And with the market in turmoil and fear of the coronavirus panicking investors, risky assets like alts could be the first to be dumped in a massive panic sell-off.
This pattern could predict such a dire event, so plan accordingly.