Altcoins need bitcoin to break higher first to escape broad selling pressure, a view that is gaining traction.

On Oct. 22, blockchain media outlet Cryptopolitan reported that market maker Wintermute and crypto trading platform Phemex flagged a recent shift of funds out of altcoins and into bitcoin.

The key point is that market capital is concentrating in large tokens. Wintermute sees the risk-reward profile as more favorable for major cryptocurrencies such as bitcoin and ether than for altcoins at this stage. It also assessed that it would be difficult for altcoins to restart a rally if bitcoin does not rise.

A key bitcoin price level was put at $82,500. That area has shifted from a previous resistance line to a zone defended by bullish buying. If bitcoin breaks above $87,000, there is room for further gains, but a drop below $82,500 would imply it could retest the $70,000 level.

Market pressure started with U.S. inflation data. U.S. inflation was 3.7%, while core prices rose 0.3%. As higher energy prices fed into core prices, risk assets wobbled and the Nasdaq fell 5.5%. Brent crude, meanwhile, rose 5.0% and U.S. Treasuries gained 2.65%.

Prices also showed weakness. Bitcoin traded around $81,200, down about 4% over the past 24 hours, while ether fell 4.24% over the same period to about $2,380. Total cryptocurrency market capitalization was tallied at $2.84 trillion, down 2% in a day.

The altcoin market extended weakness, falling 5.69% over the past week. Wintermute diagnosed that funds are leaving altcoins, except for some large high-quality names, and concentrating in bitcoin and ether. It then analyzed that bitcoin must rise first for altcoins to rebound.

Phemex offered a similar diagnosis. Bitcoin dominance, its share of total cryptocurrency market capitalization, climbed to 60% as altcoins struggled. The selloff showed one large investor liquidated positions and incurred a loss of 121.33 bitcoin, about $9.9 million. A sharp drop in Asian stock markets and China's entry into a bear market were also cited as factors that dampened investor sentiment.

The next turning point is the Federal Open Market Committee meeting on Oct. 28. Wintermute sees it as difficult for the current narrow range to persist even after the meeting, and said prices could move in either direction depending on the outcome. It forecast that if the Federal Reserve sends a hawkish signal, bitcoin could face further downside pressure alongside the Nasdaq, but a dovish stance combined with strong corporate earnings could become fuel for additional gains.

Market focus is on whether bitcoin can recover the $82,500 level and then attempt a break above $87,000. Whether altcoins rebound is also expected to be gauged only after bitcoin's direction is confirmed.