Today we will analyze the DeFi market using the Dominance chart and draw general conclusions about the further development of the situation with all tokens.
Why is this chart interesting to us?
This chart looks similar to the BTC.D and ETH.D charts, as it displays the dominance of the DeFi sector as a whole. If I expect the start of an alt-season, then my main task is to analyze.
Growth of the DeFi Sector
After the bullish market of 2021, the DeFi sector has grown significantly, and even in a bear market, the decline has not been as deep as one might expect. The entire process of forming the bearish phase is clearly visible on the chart. The price was in a sideways trend, where important events unfolded. For example, the increase in dominance in 2023 contributed to the rise of many tokens, and some market participants began to think about the start of an alt-season. However, this was just a local sideways trend, accompanied by both corrections and growth.
Reasons for Possible Uptrend
The market, of course, owes nothing to anyone. However, I assume that a reversal towards a bullish phase is possible. Right now, I observe good trading of the lower level and a strong bounce upwards on high volumes, which suggests that a continuation of the decline is unlikely. Furthermore, price consolidation above the resistance level is visible, which is maintained on lower time frames, indicating a possible continuation of the upward trend.
However, it is worth remembering that the price is still in a zone of uncertainty, and the situation may develop unpredictably. For confident growth, it is necessary to consolidate above the mark of 5.16, after which the formation of the upper part of the sideways range will begin, signaling further market growth.
Nevertheless, waiting for this moment may lead to missing out on a significant part of the movement. While there is a correction on lower timeframes, and the entire market is declining... the continuation of the trend will trigger FOMO (fear of missing out).
Analysis of Indicators and Volumes
The DPO indicator had already shown divergence before the sharp market spike, which could have prompted traders to increase their positions. Volumes show increasing interest in altcoins, which will lead to heightened buying activity and, consequently, market growth.
DeFi Capitalization
The capitalization of the DeFi sector has reached one trillion dollars, setting new historical highs, which is a good sign for a bullish trend. The minimum target, in my estimation, is the mark of nine trillion dollars, which is almost ten times the current value.
