by Nexus Investor
Bitcoin: $61,837
Ethereum: $2,895
Solana: $143
XRP: $0.51
Doge: $0.14
Historical Context and Recent Trends: Bitcoin Dominance
Bitcoin Dominance in finally starting to creep up to a local high level currently just under 54%. Bitcoin, the digital gold that everyone seems to either love or hate, but can’t stop talking about. As of today, Bitcoin’s price is hovering just under $62,000, a slight drop from its recent high of $73,000. It’s like that one friend who’s always the life and soul of the party but occasionally needs a breather. Bitcoin dominance, which refers to Bitcoin’s share of the total cryptocurrency market capitalization, is a bit like that friend’s charisma; it’s a measure of how much sway Bitcoin holds over the entire crypto scene.
We covered in our recent article: bitcoin taking a wobble around $57,000, but thus far it did not hit our price target in the $50,000-$55,000 range, however, that is still on the cards in the near term, and if that does happen, we expect the Bitcoin dominance to extend even higher.
Back in November 2022, Bitcoin dominance hit a low of around 37%. Yes, you read that right 37%. This was a significant low point, indicating that altcoins were having their moment in the spotlight.
Traditionally, Bitcoin dominance tends to increase in the year leading up to a halving event and continues to rise into the halving year. This pattern was evident in the last cycle, with Bitcoin dominance peaking around 70% in August 2019, the year before the halving, and again in March 2021, post-halving. Between these peaks, an “alt season” often occurs, where altcoins experience significant gains, temporarily reducing Bitcoin’s market dominance.
The Impact of Stablecoins and Altcoins: Bitcoin Dominance
The cryptocurrency landscape has evolved with the introduction of more stablecoins and a diverse array of altcoins, altering the dynamics of Bitcoin dominance. Stablecoins, such as USDT and USDC, offer a safe haven for investors during volatile periods, reducing the necessity to stay within Bitcoin. Similarly, the growing popularity and utility of various altcoins such as Solana, have led to a more distributed market capitalization.
At Nexus Investor, our analysis suggests that due to these factors, Bitcoin dominance may top out closer to 60% in the upcoming cycle, rather than reaching previous highs of around 70%. This reflects the maturing cryptocurrency market where investors have more options and are increasingly diversifying their portfolios beyond Bitcoin.
Current State and Market Strategies: Bitcoin Dominance
Currently, Bitcoin dominance stands at 53.98%, having been close to 55% just last week. Bitcoin holders should closely monitor this metric, as it provides insights into market sentiment and potential shifts in capital flows, from Bitcoin to high cap altcoins such as Ethereum and Solana, to Mid-cap and then to low-cap coins, where more risk appetite is needed.
Strategic Moves for Investors: Bitcoin Dominance
For Bitcoin holders, it is essential to consider the following strategies:
- Monitoring Dominance Levels: Keep a close watch on Bitcoin dominance levels. A rising dominance typically indicates Bitcoin’s strength. During such times, pullbacks like the recent drop from $73,000 to just under $62,000 usually result in altcoins dropping by a much higher percentage. Additionally, altcoins tend not to rise as much as Bitcoin when in these types of uptrends. Once this pattern changes, it might be a good time to move some funds from Bitcoin into altcoins.
- Evaluating Bitcoin/Altcoin Pairs: Analyse dominant Bitcoin/altcoin pairs. Shifting some Bitcoin holdings to high-potential altcoins during periods of declining Bitcoin dominance can maximize potential returns.
- Diversification: Diversifying investments across various cryptocurrencies can reduce risk and capitalise on the growth of emerging projects.
- Staying Informed: Stay updated with market trends, news, and regulatory developments, as these can significantly impact the performance of both Bitcoin and altcoins.
Bitcoin dominance remains a crucial indicator in the cryptocurrency market. Understanding its trends and implications can help investors make informed decisions. As we approach the next halving event, keeping an eye on Bitcoin dominance levels and strategically managing portfolios will be key to navigating the evolving crypto landscape.
Not your keys, not your Crypto
Here at Nexus Investor we advocate holding your cryptocurrency in a hardware wallet off the centralised exchanges in order to safeguard yourself in the event of a centralised exchange getting into trouble and you can’t withdraw your funds. Two very solid options are wallets by Ledger and Trezor. We will be covering these in more detail in a future article, but for now feel free to have a look below to see which may be of interest.
This article is brought to you by Nexus Investor, providing insight and expertise across many financial and investment markets. Remember, this article does not constitute financial advice. Please do your own research before taking any investment actions.
