BTC running low on battery?
On August 11 2018, the Bitcoin dominance level (market share) touched 50% for the first time in 2018. However, the move didn’t come amid a crypto market rally. In fact, the cryptocurrency space has been in free fall until mid-August, moving in a sideways trend since then.
On August 14, the indicator touched 54.53%, which is the highest level since December 17, 2017. Interestingly, the latter is the same day when Bitcoin hit its record high close to $20,000.
Currently, the dominance indicator is moving above 53%, suggesting that Bitcoin still accounts for more than half of the “crypto” market. Despite the ups and downs in the crypto space, the BTC’s dominance has steadily increased since the beginning of May 2018, when it was accounting for about a third of the entire cryptocurrency market.
There are more reasons why this happens:
- As the market matures, Bitcoin is still in the spotlight, given that the regulators around the world refer to it as a landmark or a standard whenever trying to create a legal framework for the cryptocurrency market.
- When institutional investors try to enter the cryptocurrency space, Bitcoin would be the first or among the most important assets to consider. Given that more and more institutional investors find the crypto market attractive, it becomes clear why the largest digital coin maintains its dominance even when it drops in price.
- In the US, reputable exchange operators and fund providers try to get the green light from the Securities and Exchange Commission for several Bitcoin-related exchange-traded funds (ETFs). We don’t hear anything about Ethereum ETFs or Ripple ETFs. Besides, investors can already trade Bitcoin futures on CBOE and CME exchanges, suggesting that people have more channels to get exposed to Bitcoin compared to other cryptocurrencies.
At this point, Bitcoin is consolidating its position, but its dominance level was in free fall from December 2017 to January 2018. In about a month, the oldest cryptocurrency out there saw its dominance indicator declining from over 65% to about 32%.
These major fluctuations in the dominance indicator reveal how the investors’ sentiment has evolved during this period. Starting with December of the last year, investors had been in a rush to find the next profitable coin that would make them rich. Bitcoin touched its record high back then, and it was clear that its price wouldn’t double or triple overnight.
There was a thirst for fast profits though, and some of the altcoins were promising precisely that. Initial coin offerings (ICOs) became trendy, and investors were searching for the next revolutionary coin. Ripple, Ethereum, Cardano, Tron, Litecoin, IOTA – each of them saw a boost in their percentage share in the crypto market.
However, once the cryptocurrency industry started to mature, Bitcoin was viewed as a safer investment choice that could preserve value. This was true especially for institutional investors, many of whom weren’t ready to throw their millions for risky investments in altcoins. This is how Bitcoin managed to regain its leading position, and this is how we got to those three key reasons mentioned above.
Bitcoin seems to represent the quality investment that is meant to bring slow but steady profits as opposed to the exotic investments in new coins that might fail to succeed in the long-term. The investors made the switch to the asset that resembles a “safe-haven.”
The situation became quite challenging, but the panic seems to weaken as of today. The cryptocurrency market is moving in sideways, and the altcoins try to recover their recent losses. Despite that, the combined value of all the coins besides Bitcoin is still declining in the long-term. What’s even more interesting, the altcoins have no other choice than to hope for better days for Bitcoin, given that they are quite dependent on it.
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