Was 64.26% the Top Bitcoin Dominance This Cycle or Not?
Bitcoin dominance grows if the market cap of bitcoin increases compared to the one of alts, and shrinks if the market cap of bitcoin reduces compared to the one of alt coins.
To the changes in bitcoin dominance contribute both the relative price changes of BTC and alts, but also the relative inflation of new coins and tokens. Also, for alts, the newly created coins and tokens and their market cap contribute to the total.
That's why, despite the continuous price increase of BTC over time, its dominance is likely to continue to drop.
For example, in 2016, BTC had a dominance of 95%. By January 2018, it had sharply dropped to 35%, which was normal in an alt season. The next bull market, the ATH for BTC.D was at 73.57%, and then it dropped to 38.94% in the bear market.
It's interesting that compared to the 2016-2020 cycle, when the minimum BTC.D was at the end of the bull market during the euphoria of the alt season, for 2020-2024, the minimum was during the bear market, in the late summer of 2022, explainable by the collapse of Terra Luna and later FTX that year. While BTC price is going down, the price of stable coins isn't (oh well, except USDT), and they are counted as alts.
So, the bigger the stable coin market gets (and it does), the less likely it is for BTC to rise its dominance by squeezing value out of alts, since stable coins are alts too.
The max BTC.D this cycle has been of 64.26%, and is from this month, but has already dropped back to 61.14%, as you can see in the image:
The question is, would it attempt to push for a higher high in the future or that was its top this cycle?
To me it looks like the chart is definitely less violent than in the previous cycle, and having a tendency to flatten the curve and perhaps slowly reverse it soon enough.
Bitcoin has been traded relatively flat for 3 months, and practically without a heartbeat for two weeks, except for the small blip during the last few days. Was this small pullback enough to start another uptrend? We will see.
Many alts have taken a beating when BTC didn't seem to care, so if a rally starts, I believe the uptrend will be more violent for the alts as well, which obviously will make BTC.D go down.
What do you think will happen?
Posted Using INLEO
BTC has won the meme war signing up governments and fund managers to invest in it. Ethereum is taking a similar route with even Trump family throwing a large investment in it. We have not yet seen the real inflows to most projects. Most of the pumps we are seeing are likely money rotating between narratives. Once we adjust prices for the expansion of M2, the prices don't seem very impressive.
Inflation Chart
Interesting. Good comparison to money expansion. We haven't had such expansion in the previous cycles. That's another factor to consider. Thanks for sharing this!
I think this cycle will be different. The ETFs have changed quite a bit and I wouldn't be surprised to see those ETFs manipulate BTC price so it doesn't go up as far.
It is different in the sense it is more "controlled". You can see from the dominance chart how smooth it is, unlike the previous cycle, when it was wild. Right now, traditional investors seem to be totally in control. It seems unlikely that we will have another reversed bowl like we had the previous cycle. That would bring the dominance down to the same level in 2027-2028.
But the previous cycle we also dropped to a little below 40% unlike the one before to 35%. What if BTC-D only drops to 47.5% this time around?
I think it'll probably decrease first before increasing again. The ETFs from institutions and maybe governments too buying BTC may paint out a gradual decline, while alts in general, work on catching up towards their previous highs and perhaps, push above it.
BTC could go higher, but I don't see its dominance at 70% again, meaning in terms of market cap, the alts will continue to carve a bigger piece as time goes by either by growing faster or by inflating faster. Alts are an expanding space, BTC is not, and there so much money that can be thrown at it to increase the price until it naturally comes down from taking profits.
Right. The potential upside is much greater on alts than BTC. I think it's also the same more or less when it comes to potential downside. I just read recently that alt season can't be defined anymore in terms of money rotating from BTC to alts but through increasing trading activity on alts via stablecoins. If I'm not mistaken, I think it's from the people at CryptoQuant that mentioned it.
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