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.
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.
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.
About 2.5 hours ago, the Ethereum Beacon Chain underwent a 7-block deep reorganization. This suggests that the current node’s proof strategy should be reconsidered in hopes of producing a more stable chain! (Proposal already exists) pic.twitter.com/BkQrKuUlw1
— Martin Koeppelmann (@koeppelmann) May 25, 2022
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.
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.
What is the story of owning ETH after the merger?
All KPIs are down
Active wallets are stagnant
NFT hype is dead
LP trading volume is not trending well
Mobility contraction in stables
L2 cannibalization growth (h/t @TaschaLabs)ETH is down 50%, but so is the value of its block space
— 0xHamZ (@0xHamz) May 25, 2022
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 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
alternatives
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.
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.
This is mainly because Bitcoin not only the oldest blockchainbut exist independently without any central authority.
no one controls #bitcoin network.
— CZ Binance (@cz_binance) May 26, 2022
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.
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.