Bitcoin Bull Trap? Not So, Says Lesser-Known Price Indicator

Is the reversal of a lesser-known bitcoin price indicator signaling a bull trap?

That's the question being asked by Twitter's more expert crypto analysts after bitcoin's rise to $8,500 this week, a figure that's up more than 25 percent since its early April lows.

Stepping back, the indicator in question, ETH/BTC, which tracks the value of ether against bitcoin, has been behaving oddly of late.

In the past, ether's rise against bitcoin has been greeted as a negative sign for bitcoin, one that signals more traders are willing to exchange bitcoin for ether, the world's second-largest cryptocurrency.

As per the historical data, the ETH/USD pair and bitcoin are inversely related and the former tends to work as a lead indicator for the latter.

The inverse relationship makes sense as the fiat money tends to flow into crypto markets via major assets like BTC. Then, once the bitcoin valuations look overstretched, the money is rotated into the relatively cheap alternative cryptocurrencies.

This time around ETH/BTC has been rising with bitcoin, meaning bitcoin is rallying hand-in-hand with the ETH/BTC exchange rate.

Money is still being rotated out of bitcoin and into lesser-known cryptocurrencies, according to CoinMarketCap's Bitcoin Dominance Rate, an indicator that tracks the percent of the total cryptocurrency market capitalization contributed by bitcoin.

If bitcoin witnesses a long-term bearish-to-bullish.

Trend change, then the money may flow back into bitcoin from the lesser-known altcoins, thus boosting the BTC dominance rate.