Tom Lee, the co-founder of Fundstrat Global advisors and a well-known bitcoin bull, has recently revealed through social media his firm created an “altcoin correction index” that shows the market’s downward trend was a “tactically positive signal.”
According to Lee’s tweets, the altcoin sell-off saw his altcoin correction index, which “measures what % of alt-coins are down 70% from their 9-month high” hit a new all-time high of 97%. Its previous high was back in October of 2014.
CRYPTO: 1/ To put the alt-coin sell-off in a historical context: we created an “alt-coin correction index” which measures what % of alt-coins are down 70% from their 9-month high. Recently, this index hit 97%, the highest reading since 10/25/14. pic.twitter.com/0Oy9lgzHMQ
— Thomas Lee (@fundstrat) September 6, 2018
At the time, Lee added, the figure hit 87% and shortly after most altcoins saw their price nearly triple in a 7-week bull run. Back in 2014, he noted, there were only 349 altcoins with an “actual trading volume.”
In a subsequent tweet the Wall Street analyst clarified the firm still recommends investors stick to bitcoin, the flagship cryptocurrency, although the index suggests the downward trend was positive for altcoins.
In response to a reply questioning whether the index wrongly implied the total number of altcoins hasn’t changed throughout time, Lee revealed it’s based on an index that tracks around 700 liquid altcoins.
According to available data there are now well over 1,500 altcoins in the market. Fundstrat’s index likely tracks those with the largest market cap as those often have the most liquidity, including EOS, ethereum, bitcoin cash, XRP, ethereum classic, litecoin, dash, and NEO.
Lee, as CryptoGlobe recently covered, has argued BTC may end the year “explosively higher” due to a correlation between the flagship cryptocurrency and emerging markets. The analyst has been maintaining a $25,000 bitcoin price prediction throughout the bearish trend.
Although the analyst’s index seemingly makes a bullish case for altcoins in the near future, Lee has in the past explained he would prefer to own bitcoin over ethereum and litecoin, and bitcoin cash over XRP.
It’s worth noting he predicted BTC would rally after this year’s Consensus conference. At the time BTC’s price actually dropped, and although his prediction went awry he owned up to it and explained the drop was caused by a lack of regulatory clarity.
The altcoin correction index isn’t the first crypto-related index Fundstrat created. Earlier this year, he created a “Bitcoin Misery Index” that was signaling it was time to buy the cryptocurrency in March.