As the cryptocurrency market rebounds, Bitcoin’s dominance rises again

Bitcoin’s price rises with altcoins The market returns to a bullish super cycle For Bitcoin (Bitcoin). The flagship cryptocurrency broke through the resistance level of US$42,000 for the first time since May 19, and reached a peak of US$42,541 on July 31.

In addition to the market rebound, the Bitcoin Dominance (BTCD) index has also seen an upward trend. According to TradingView data, BTCD hit a 3-month high of 49.2% on July 31. The last time these levels were reached was in May, when it started to fall from an annual high of 73.6% reached at the beginning of the year. January.

The BTCD index is calculated using the ratio of the Bitcoin market to other cryptocurrency markets. As the name suggests, being a flagship crypto asset shows that Bitcoin has a dominant position among other cryptocurrency tokens.

Pete Humiston, manager of Kraken Intelligence, the research department of the cryptocurrency exchange Kraken, said in a discussion with Cointelegraph about the market rebound led by Bitcoin: Because BTC is a safe haven asset for cryptocurrencies, the rebound in dominance indicates that market participants are unwilling to switch back to altcoins.”

It is also important to note that the last time the BTCD index was at these levels, it fell from its January high in a full-blown bull market. And it is currently in an uptrend starting from the low hit in mid-May. Back in May, altcoins like Ethereum (Ethereum) Outperformed BTC, which caused its dominance to drop below 40%. However, this time, the price of BTC has gradually increased, and not all altcoins can match it, which has led to an increase in the dominance of BTC.

The bull market may not cause BTCD to rise further

Except that the market value is significantly larger than other crypto assets, put aside stablecoins. Bitcoin is the cryptocurrency with the highest trading volume in 24 hours, followed by Ethereum. However, as we all know, due to the influx of the market, stablecoins will also affect Bitcoin’s dominance. A typical example is in April, when coins worth 3 billion U.S. dollars (USDC) Caused by the influx Bitcoin dominance drops to its lowest point Since August 2018.

Humiston further talked about the market conditions needed to maintain the continued upward trend of the index. He said: “Until the day when we re-enter the bull market uptrend, we can expect that people will remain relatively risk-averse, altcoins are underperforming, and BTC The dominant position tends to be higher.”

Nikolaos Panigirtzoglou, global market strategist at JPMorgan Chase recently Mention In an interview with CNBC, said that if Bitcoin’s dominance exceeds 50%, this may be an indicator of whether the “bear market phase is over” in the cryptocurrency market. However, it can be seen from the bull market in late 2020 or even in 2018 that the dominance of BTC usually rises at the beginning of the recovery after the economic downturn and declines during the euphoric phase of the market. Usually, there will be major adjustments after this excitement period, and then the cycle repeats.

It is also worth noting that even though BTCD is used as a pure percentage indicator of market sentiment, it is usually not the most reliable indicator. As the cryptocurrency market matures, some altcoins will inevitably become more resistant to crashes and lead to a decline in Bitcoin’s dominance.

After the dominance of BTC dropped to nearly 40%, a report by Stack Funds was released in May showing Index may rebound And it marks the end of the market downturn. Shaun Heng, vice president of growth and operations at CoinMarketCap, a cryptocurrency ranking and analysis platform, told Cointelegraph:

“Although Bitcoin is volatile, I believe it will still dominate the market for some time to come. Bitcoin is the foundation of all other cryptocurrencies. Although I don’t think it will reach the heights it used to be, I don’t think it will be possible. It will drop significantly in the foreseeable future.”

Although Bitcoin is generally considered a safe-haven asset in the cryptocurrency market, the “emotional recovery” that Bitcoin is witnessing has allowed it to regain some of the things it lost at the beginning of the summer. ETH showed 12.1% in the past 7 days, while Bitcoin showed 3.30%.

Ethereum flips Bitcoin?

In recent developments, Dan Morehead, CEO of Pantera Capital, mentioned that the transition of Ethereum to the Ethereum 2.0 (Eth2) network will help Ethereum surpass Bitcoin. In addition to the price increase of ETH, the Ethereum network is also about to undergo a major update. On August 4, in the benchmark event of migrating the blockchain to a fully proof-of-stake network, the highly anticipated London hard fork happened It added five Ethereum Improvement Proposals (EIP), including EIP-1559.

This is a new transaction pricing mechanism that can change the dynamic expansion and contraction of the block size to improve scalability. This will change the way network fees are managed by incentivizing miners to prioritize transactions.

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Although this is a huge change for the network and is highly anticipated in the community, Humiston mentioned why this may not soon affect the macro trend of the market: “Because the impact of the London hard fork/EIP-1559 will require The time is up, BTC determines the macro trend, and we don’t expect that August 4th will trigger a new alternative season.”

He even added that since the hard fork is a high-profile event and is seen as a long-term tailwind for the token, the event may be a situation of “buy rumors and sell news”, leading to short-term ETH weakness. However, the hard fork may also support another rebound of ETH. It is important to realize that due to the high correlation between the price movements of ETH and BTC, ETH may not rebound solely on the development of the hard fork, and requires BTC to remain above $40,000 in order to rebound.

Although the market capitalization of Ethereum only accounts for 18% of the entire cryptocurrency market – less than about 50% of the market capitalization of BTC – its use in the Decentralized Finance (DeFi) market usually makes it ranked by 24-hour transaction value The highest token competitor. In fact, as early as July, an analyst at Goldman Sachs stated that Ether could Exceed Bitcoin is the most important digital currency because it seems to be the currency with the “highest practical use potential”.

However, Heng believes that “there is a high degree of correlation between the performance of Bitcoin and the performance of altcoins, even for Ethereum. As the value of Bitcoin declines, the value of altcoins is also falling. Bitcoin’s past performance has been certain To a certain extent, it has promoted the availability of altcoins today.”

Signs coming?

As Bitcoin’s dominance continues to rebound, and the price level remains above $38,000, premium cryptocurrencies continue to eliminate the term “flip”, namely Bitcoin’s active addresses decrease After more than two weeks, it has become the focus of people’s attention again. In addition to MicroStrategy CEO Michael Saylor Promise to buy more bitcoins. Although the company holds more than $400 million in “book” losses, he says there is no reason not to do so Hold Bitcoin for 100 years.

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In addition to institutional investors like Saylor maintaining confidence in the market downturn, it seems that even retail investors have not succumbed to the recent fear, uncertainty, and doubt (FUD) surrounding the cryptocurrency field.Report from disclose quantity Global cryptocurrency users more than doubled From 100 million in January this year to 220 million in June. This enhanced support noted in the market adds to the positive sentiment, which usually helps to improve the price stability of BTC-a characteristic that is usually expected for mature assets in financial markets.

This continued upward trend in Bitcoin’s dominance is likely to be a sign of another bull market season being triggered. From the situation witnessed by the bull market that began in the fourth quarter of 2020 and lasted until May 2021, the dominance of BTC first rose to an annual high of 73.5%, and then other altcoins caught up with their proportional price trends, leading to Fully bragging. If this trend repeats, the crypto community may enter another market dominated by bulls, and the rise in BTC’s dominance is the standard bearer of this event.