The cryptocurrency market is in a bit of an odd place right now. Well, more than just a bit. The current trend of a constant Bitcoin dominance on the rise is quite a departure from recent trends. However, with the current market rebound, things are looking up again.
As we have come to expect, the globe’s most popular cryptocurrency is on the rise once again. On 14th February, the total value of all bitcoins in existence was $12,933,838,831. That’s up from $12,037,569,795 on 9th February, and $11,943,271,724 on 3rd February. That’s a +32.4% increase in value over a two week period. The crypto market as a whole has also shown a strong performance over the same period, with the total value of all cryptos increasing +22.1% over the same two week period.
The dominance of Bitcoin in the cryptocurrency market has risen again, and it now has a 34% share, according to Coinmarketcap.
The price of Bitcoin has been rising in lockstep with the price of altcoins, prompting talk of the markets returning to a bullish supercycle for Bitcoin (BTC). For the first time since May 19, the flagship cryptocurrency broke over the $42,000 barrier mark, reaching a high of $42,541 on July 31.
The Bitcoin dominance (BTCD) index has been trending upwards in tandem with the market rise. According to TradingView statistics, BTCD reached a three-month high of 49.2 percent on July 31. It was last at these levels in May, when it was on the way down from an annual high of 73.6 percent at the beginning of January.
The Bitcoin market’s ratio to the rest of the cryptocurrency market is used to construct the BTCD index. Being the flagship crypto asset, as the term implies, denotes Bitcoin’s supremacy over other cryptocurrency currencies.
“Because altcoins bore the brunt of the sell-off over the past few months, and because BTC is crypto’s’safe haven’ asset, a rally in dominance indicates that market participants are reluctant to rotate back into ETH,” Pete Humiston, manager at Kraken Intelligence, the research division of Kraken, a cryptocurrency exchange, told Cointelegraph.
It’s also worth noting that the BTCD index was at similar levels the last time it was on its way down from a high in January during a full-fledged bull market. It is presently on an upswing from the lows it reached in mid-May. In May, altcoins like as Ethereum (ETH) outperformed BTC, resulting in BTC’s dominance falling below 40%. This time, however, BTC has been steadily increasing in price, which not all altcoins have been able to match, resulting in BTC’s growing domination.
A bull market may not lead to additional gains in BTCD.
Aside from stablecoins, Bitcoin is the most actively traded crypto-token in a 24-hour period, with Ethereum coming in second. Stablecoins, on the other hand, are known to have an effect on Bitcoin supremacy owing to large influxes in that market. A good illustration of this occurred in April, when a $3 billion inflow of USD Coin (USDC) caused Bitcoin dominance to plummet to its lowest level since August 2018.
“Until it’s plain as day that we’re heading back into a bull market upswing, we should anticipate people to stay somewhat risk-averse, altcoins to underperform, and BTC domination to trend higher,” Humiston said of the market conditions needed to maintain the index’s current rise.
In a recent interview with CNBC, JPMorgan’s global market strategist, Nikolaos Panigirtzoglou, said that if Bitcoin dominance rises over 50%, it may signal whether the cryptocurrency market’s “bad phase” is finished or not. However, as shown in the bull run that began in late 2020 and continued into 2018, BTC dominance increases at the commencement of a rebound after a downturn and falls during euphoric market periods. This moment of exhilaration is usually followed by a significant correction, and the cycle repeats again.
It’s also worth noting that, although BTCD is often employed as a gauge of market sentiment when expressed in percentage terms, it’s not always the most accurate indication. As the cryptocurrency markets develop, certain altcoins will inevitably become more resistant to collapses, resulting in a decrease in Bitcoin’s supremacy.
After BTC dominance fell to almost 40% in May, Stack Funds published a study claiming that the index might recover and signal the end of the market downturn. Cointelegraph spoke with Shaun Heng, vice president of growth and operations at CoinMarketCap, a cryptocurrency ranking and analytics platform:
“Despite its volatility, I think Bitcoin will continue to rule the market for some time. Bitcoin is the foundation for all other cryptocurrencies, and although I don’t anticipate it to reach the heights it has in the past, I also don’t expect it to decline much in the near future.”
While Bitcoin is generally seen as the cryptocurrency markets’ safe-haven asset, this “sentiment rebound” has seen it reclaim some of the ground it lost at the start of the summer. ETH has gained 12.1 percent in the past seven days, compared to 3.30 percent for Bitcoin.
Is Ethereum going to be the next Bitcoin?
According to Dan Morehead, the CEO of Pantera Capital, the transfer of Ethereum to the Ethereum 2.0 (Eth2) network will help Ether surpass Bitcoin. Aside from ETH’s price rise, the Ethereum network is about to get a significant upgrade. The highly anticipated London hard fork, which adds five Ethereum Improvement Proposals (EIPs), including EIP-1559, takes place on August 4 in a benchmark event toward the transfer of the blockchain to an exclusively proof-of-stake network.
This is a novel transaction pricing method that improves scalability by changing the dynamic growth and contraction of block sizes. By rewarding miners for prioritizing transactions, this is likely to alter the way network fees are handled.
BTC price reaches bull trigger as mysterious buyers gobble up supplies – more like ‘shock-to-flow’
Despite the fact that this is a significant shift for the network and is eagerly anticipated by the community, Humiston explained why it is unlikely to have an immediate effect on the macro trend of the markets: “We don’t expect August 4 to kick off a new alt season since the effect of the London hard fork/EIP-1559 will take time to manifest and BTC controls the macro trend.”
He further went on to say that since the hard fork is a high-profile event that is seen as a long-term tailwind for the token, it may be a case of “buy the rumor, sell the news,” resulting in ETH’s short-term weakening. However, it’s conceivable that the hard split may help ETH rise once again. It’s essential to note that, owing to the strong connection between ETH and BTC price fluctuations, ETH may not be able to rise on its own, and that a rally would need BTC to stay above $40,000 levels.
Despite the fact that Ethereum’s market capitalization is just 18 percent of the total crypto market — less than half of BTC’s — its use in decentralized finance (DeFi) marketplaces often makes it a candidate for the top-ranked token by 24h trading prices. In fact, a Goldman Sachs analyst predicted that Ether will surpass Bitcoin as the most popular digital currency because it had the “highest real-world usage potential.”
“There is a strong connection between Bitcoin performance and that of altcoins, even with Ethereum,” Heng said. As the value of Bitcoin falls, so does the value of altcoins. And Bitcoin’s previous success has helped to increase altcoin availability today.”
Is this a foreshadowing of things to come?
As Bitcoin’s dominance continues to rise, with price levels maintaining over $38,000, the premium cryptocurrency continues to debunk the “flippening” myth that was reignited by a two-week decrease in Bitcoin’s active addresses. Michael Saylor, the CEO of MicroStrategy, has also promised to purchase more BTC. Despite the fact that the company has over $400 million in “paper” losses, he believes there is no reason why Bitcoin could not be held for 100 years.
According to ConsenSys founder Joe Lubin, NFTs are the next step for business Ethereum.
Apart from institutional investors like Saylor who have maintained their confidence despite the market downturn, it seems that even retail investors have not succumbed to the current fear, uncertainty, and doubt (FUD) surrounding the crypto-verse. According to Crypto.com, the number of crypto users globally has more than quadrupled from 100 million in January to 220 million in June of this year. Such re-enforced market support contributes to the positive mood, resulting in greater price stability for BTC – a feature that is often associated with mature assets in financial markets.
This continued rise in Bitcoin supremacy may be an indication that another bull market season is about to begin. The BTC dominance initially climbed to an annual high of 73.5 percent in the bull run that started in Q4 2020 and continued until May 2021, before the rest of the altcoins caught up to its proportionate price action, resulting to a full-blown bull market. If this pattern continues, the crypto world may be headed for another market driven by bulls, with increasing BTC domination as the leading indicator.
Crypto-market volatility is the norm these days, but it is still interesting to see how the market’s fluctuations could be predicted based on the dominant cryptocurrency. For the week ending May 11th, the bitcoin dominance index rose to 65% after falling to 62% on Sunday of last week. The bitcoin dominance index is the ratio between the market cap and the number of bitcoin transactions, and is used to measure the concentration of the dominant cryptocurrency on the market.. Read more about btc major correction and let us know what you think.
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