3 reasons why Bitcoin is regaining its dominance in the crypto market

Bitcoin (bitcoin) is regaining its lost dominance of the crypto market, even as it trades nearly 60% below its all-time high.

Bitcoin Dominance at 6-Month High

The Bitcoin Dominance (BTC.D) index, a measure of BTC’s market capitalization versus the rest of the cryptocurrency market, jumped to around 47% on May 27, the highest level since October 2021.

Bitcoin market dominance daily chart. Source: TradingView

While Bitcoin’s market capitalization has fallen from $1.3 trillion in November 2021 to nearly $550 billion in May 2022, the dominant index is still up, suggesting traders are more willing to sell altcoins.

Let’s take a look at three possible reasons why traders are exiting the altcoin market in search of Bitcoin safety.

The Ethereum “merger” narrative is cooling

Ethereum’s native token, Ether (Ethereum) is the largest alternative cryptocurrency by market cap, and its market dominance has continued to decline over the past five months — from 22.38% in December 2021 to 17.86% in May 2022.

Ethereum market dominance daily chart. Source: TradingView

ETH/BTC plunges after two years of continuous uptrend An increase of more than 200% Between September 2019 and December 2021.

As Cointelegraph reported, Ethereum has outperformed Bitcoin in recent yearslargely due to the hype surrounding its long-awaited protocol upgrade, known as “merge,” which hopes to make ethereum more scalable and less expensive.

However, the upgrade aimed at transforming Ethereum’s blockchain from proof-of-work to proof-of-stake (the counterpart known as the beacon chain) has repeatedly faced delays in its launch.

Just recently, Martin Köppelmann, co-founder of the Ethereum Virtual Machine (EVM)-compatible Gnosis Chain, highlighted a seven-block reorganization on the beacon chain, which means The chain briefly “forked”“In the testing phase.

Ether fell nearly 13.5% Following the May 25 disclosure, it fell against the US dollar, while ETH/BTC plunged to 0.059, its lowest level in six months.

ETH/BTC daily price chart with key support levels. Source: TradingView

Independent market analyst OxHamZ pointed to the lack of a narrative for Ethereum to drive ETH prices higher after undergoing a merger upgrade, saying that investors had “priced in” the network upgrade hype.

luna zero

Since Terra (Luna) market crashes.

LUNA/BTC, a financial instrument that tracks the strength of the Terra coin against Bitcoin, fell 99.99% in May to 0.00000004, making it almost worthless.

Meanwhile, LUNA refused the same against the US dollarraising expectations of traders dumping tokens in search of the safety of BTC and cash.

LUNA/BTC daily price chart. Source: TradingView

LUNA had a market cap of $40.88 billion before the fatal crash in May.

related: Crypto funds under management fall to lowest level since July 2021


Overall, the altcoin market, which encompasses everything from mega-blockchain projects to rough cryptoassets, is down nearly 65% ​​six months after topping nearly $1.7 trillion.

Daily chart of altcoin market capitalization. Source: TradingView

An in-depth look at some coins shows that, unlike Bitcoin, most have fallen by more than 80% from their all-time highs, suggesting investors as a whole are exiting altcoins and moving to cash, stablecoins or BTC.

DeFi projects and their downside retracement from all-time highs.Source: Messari
Some dead crypto projects by 2022. Source: Messari

This is mainly because Bitcoin not only the oldest blockchainbut exist independently without any central authority.

Historically, Bitcoin’s dominance during crypto bull markets has declined as new coins emerged during the frenzy phase.

For example, the notorious duration Initial Coin Offering (ICO) Pump This coincided with the decline of BTC.D from nearly 96% in January 2017 to 35% in January 2018.

BTC.D daily price chart. Source: TradingView

Then the March 2020 crash was the start of the DeFi and non-fungible token (NFT) hype, which was further fueled by the Federal Reserve’s quantitative easing policy.

Therefore, if Bitcoin’s market dominance has indeed bottomed out, it may once again match the Macro Bottom for Bitcoin Priceand could start a new bull market phase in the coming months.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk and you should do your own research when making a decision.