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Tough times for altcoins as Bitcoin’s dominance surges

In its first years, Bitcoin represented 100 percent of the cryptocurrency market. After falling to a low of 33 percent in January 2018 at the height of the altcoin boom, Bitcoin’s dominance of the crypto market cap is now back up to 70 percent. Where next for altcoins?

As the price of BTC has pushed up in Q2 and Q3 2019, Bitcoin has reclaimed its market dominance, and now commands a 70 percent share of the entire market, a 28-month high.

In 2019, Bitcoin’s price performance has outpaced its smaller rivals by climbing 175 percent, significantly more than Ethereum which has climbed 30 percent, or XRP which is down 35 percent after a series of sell-offs by Ripple Labs.


Percentage gains on Bitcoin, Ethereum, and XRP in 2019

Bitcoin dominance is a controversial market metric. Critics claim that it is warped by dead altcoins that nobody trades anymore. Nevertheless, the measure is useful as a gauge of market sentiment, and the majority of market data providers — including TradingView, Brave New Coin and CoinMarketCap — agree that Bitcoin dominance levels are now sitting at over 70 percent. A key reason is a perceived flight to safety – crypto investors have been happy to sell out of underperforming altcoins and return to the benchmark asset of the wider crypto ecosystem, Bitcoin.


Bitcoin dominance as calculated by TradingView

One study by analysts at Arcane Research points to an even higher Bitcoin dominance figure. Using volume-weighted market capitalization, the report finds that Bitcoin actually accounts for 90 percent of the crypto market, with Ethereum, Litecoin and thousands of other smaller cap coins only accounting for less than 10 percent.

How much higher Bitcoin’s dominance can climb is not clear. Some speculate that the dominance signals the end for most altcoins. If Bitcoin is about to embark on a bull run, it will eventually bring the price to new highs, leaving altcoins far behind and forcing long suffering altcoin holders to capitulate or miss out on Bitcoin profits.

Others see Bitcoin’s current high dominance level as short-lived — the peak of a natural cycle which will soon give way to an altcoin resurgence.

Alts never coming back?

Bitcoin maximalists — who believe that Bitcoin is the superior crypto asset — are feeling vindicated by the renewed Bitcoin dominance. Indeed, many seemed to relish the opportunity to point this out.

Veteran trader Peter Brandt seized the opportunity to dismiss ‘altcoin junkies’, claiming that “altcoins are to Bitcoin what lead is to gold.”

Crypto pundit Max Keiser had a similar view, tweeting that altcoins will never recover from the downturn. “Alts never coming back… Sorry,” tweeted Keiser, with an image of the altcoin and bitcoin charts.

These views are backed by research from investment firm CoinShares, which suggests that the reason for Bitcoin’s fresh dominance and the lack of an ‘alt season’, is because the character of investors leading the market has changed.

The absence of spikes in Bitcoin Google searches during the recent price run suggests a change in the character of cryptocurrency investors. Investors now seem less interested in investing in risky altcoins, when Bitcoin is outperforming the wider crypto market.

“The market has mercilessly denied calls for a customary ‘alt season’ while Bitcoin’s price rally has stolen all of the attention, at least so far this year,” state the CoinShares analysts.

The research concludes that a key reason for Bitcoin’s burgeoning dominance is due to institutional investors pouring funds into Bitcoin for the long term, instead of using the cryptocurrency as a portal to altcoins.

Wall Street’s presence is evidenced by increased volume on institutional platforms. CME has reported several record-breaking highs for Bitcoin futures trading volumes in the past few months, and Grayscale’s Bitcoin Futures Product (GBTC), is reported to be buying up to 21 percent of the newly mined Bitcoin supply for Wall Street investors.

It’s clear that institutional investors have opted for the strong brand name of Bitcoin, which offers sufficient liquidity for large purchases, a lively derivatives market, trusted fiat on-ramps, and clearer regulatory status.

According to Binance’s latest report, however, even institutional buyers will eventually turn to altcoins.

The exchange’s research suggests high levels of Bitcoin dominance will likely remain in the short term, but in the longer term, the balance will shift. An alt season may yet come, but it sure seems a long way off.


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