Bitcoin's Dominance Flashes Bearish Signal, Altcoins Rally Amidst Market Turmoil

Bitcoin's dominance has been flashing warning signs for traders, with its market share relative to the total crypto market cap showing a bearish divergence. While the Relative Strength Index (RSI) has not yet given a sell signal, indicating that momentum has not fully shifted bearish, the question remains: is Bitcoin preparing for a retreat, or is this merely a temporary cooling-off period?

In early February, BTC.D surged by 5% following a market-wide shakeup triggered by Trump's tariff stance, which wiped out over $420 billion in crypto market cap. As panic spread, Bitcoin held strong while altcoins crumbled, with most high-cap altcoins hitting new lows against BTC. History shows that Bitcoin's consolidation often sparks altcoin rallies, and with high-cap altcoins already showing weekly gains, this trend might be ready to play out again. However, with a bearish divergence in play, billions are at risk of liquidation in the coming days, setting the stage for a potential long squeeze.

This month, Bitcoin has shed over $1 trillion in market cap, dropping from a peak of $2.10 trillion at the end of January. With sentiment sinking into fear, a BTC rebound still feels far off. If its dominance slides further, we could see the fear index dive into 'extreme' territory, setting the stage for potential panic selling. However, there's a slight uptick in the index, with momentum now neutral. The RSI hasn't fully flipped bearish yet, leaving room for a possible turnaround. Altcoins are seeing a 5% correction in daily price action, suggesting the recent surge could be nothing more than a cooldown phase – rather than the start of a full-blown altcoin season. Still, to prevent the RSI from hitting a low, keeping a close watch on the futures market is key, as it could pose the biggest threat to Bitcoin's dominance.