Bitcoin dominance has been growing steadily after dropping to 40% in November 2022. This April, Bitcoin dominance crossed the 64% mark, meaning that the market cap of Bitcoin accounts for nearly two-thirds of the entire crypto market capitalization. While some still wait for the altcoin season to begin, others state this cycle is different, and there will probably be no altcoin seasons ever again.
What does the Bitcoin dominance metric indicate?
Bitcoin dominance is a metric indicating the share of Bitcoin in the overall cryptocurrency market capitalization. When Bitcoin was the only cryptocurrency in the world, it had a 100% share. As soon as other cryptocurrencies began to emerge, Bitcoin’s dominance began to decrease. However, Bitcoin has always been the most expensive crypto, so it took years for the rest of the crypto market to gain a substantial share of the market.
2017 was a transformative year, when the rise of Ethereum-based tokens and especially an ICO boom dragged Bitcoin dominance from 96% down below 40% by 2018. From 2018 to 2020, Bitcoin’s share has been volatile, moving in high amplitude. In the first half of 2021, Bitcoin dominance dropped from 70% to around 40% in the wake of the rise in the DeFi market. The year also saw an NFT market surge, and most NFTs were built on Ethereum and BNB Chain.
It may seem that the Bitcoin dominance chart is rather a reflection of the market state, but it is also an indicator used by traders and investors to figure out the market sentiment and correct their trading/investment strategies.
For instance, declining Bitcoin dominance was seen as a crypto rally sign, as in the bull market, traders and investors were eagerly experimenting with altcoins. High Bitcoin dominance was usually seen as a sign of a bear market, a period when crypto investors preferred to stick with the best store of value, Bitcoin, rather than invest in riskier altcoins. However, some experts think that this cycle will change the altcoins’ role in the crypto market.
How soon is the altcoin season?
“Bitcoin, not crypto,” — a motto especially popular among Bitcoin maximalists, is now reflecting a new trend in crypto investment. Scott Melker, a host of the Wolf of All Streets, has referred to a model in which investors eagerly buy both Bitcoin and altcoins as “a washing machine,” in which value is endlessly circulating between Bitcoin and altcoins with gradual inflows of new money.
In an interview with Crypto.news, CoinW CSO Nassar Achkar claims that this cycle is different. Instead of buying the dip to sell high, investors buy Bitcoin whenever they can and never sell it. More than that, fewer people are eager to exchange Bitcoin for altcoins. The idea of Bitcoin as a reserve currency has been boosted by governments and corporations and is spreading among retail investors.
Governments and corporations themselves became massive Bitcoin buyers. They spend millions of dollars to buy bitcoins. These dollars are new for the market, not some gains from the altcoin trading. This new money is staying in Bitcoin, as no one sells it. That’s an outlook that explains the growing Bitcoin dominance. Bitcoin gets pumped with new fiat inflows, while altcoins’ share is slowly fading away.
As Melker outlines it, “altcoins are bleeding against BTC because holders are selling to pay bills, not to rotate into Bitcoin.”
The Cryptoverse CEO, Benjamin Cowen, noted that the Bitcoin dominance is 69% if we exclude stablecoins. When asked about the altcoin season, he just shared a chart indicating that the altcoin/BTC pairs should decline even more before they bounce back and start growing.
Some believe the altseason will be on time. Although the logic of those who say that altcoins will no longer get massive is pretty solid, belief in altcoins is not pointless.
The thing is that we can’t know what will happen with the crypto market in the next couple of years. The new trends like DeFi or NFT booms in the past may accelerate the altcoin market and unleash a new altseason. It depends on new technologies and the mass appeal of those technologies.
It’s not the first time that Bitcoin dominance is on the rise. It was happening in 2018 and the first half of 2019, but then it turned out that altcoins are anything but dead.
Without a doubt, Bitcoin is the word of this season. It doesn’t cast a shadow on a sudden gold price rally. And, who knows, probably in 2028, there will be a new word that will change everything, and Bitcoin dominance will drop below 50% like it did in 2022.
