Bitcoin Dominance Index on the Rise: Good News?

Bitcoin Dominance Index on the Rise: Good News?

Although it was historically high when Bitcoin was the only crypto project with some visibility, the dominance of bitcoin there has been a tendency to fall out in recent years. It must be said that the emergence of blockchain projects like Ethereum or others like Cardano, Solana, Avalanche or before Terra, has greatly helped to dilute the inflow of capital into the crypto market. But for several weeks, the dominance of Bitcoin has been skyrocketing. In this article, we will try to question the scope of this element.

Bitcoin is dominated by more than 46%

First, let’s try to define what is the dominance of Bitcoin. It really is a ratio that compares the share represented by Bitcoin valuation, compared to the crypto market as a whole. So if the Bitcoin capital market is worth 1,000 billion and the crypto market weighs 2,000 billion, then Bitcoin dominance is: 1,000 / 2,000 = 0.5 or 50%.

The following graph, available on the Tradingview platform, shows the evolution of Bitcoin Dominance over the last 12 months:

The least that can be said is that this chart shows strong, up and down trends. Over the past 12 months, the share of the Bitcoin market in the valuation of the crypto market has risen in range between 39 and 49%.

By returning to the 47% threshold, Bitcoin’s dominance is back to levels achieved since last October. While it was below 42% on May 8, it rose just last month! At the time of writing, the Bitcoin market limit for a crypto market weighing $ 1,230 billion is $ 568 billion, according to Coinmarketcap data. ie dominance of 46.2%.
Bitcoin Dominance Index on the Rise: Good News?

Good news or bad?

It’s hard to tell whether this is good news or bad news. Indeed, bitcoin dominance often led to an increase in altcoin season. A trend especially observed in October 2021, even when Bitcoin dominance increased by 47%.

So when Bitcoin dominates the market, investors on the altcoin market tend to look undervalued. So this behavior inevitably draws towards the bigger projects like Ethereum, Solana or Cardano but also towards more modest altcoins.

During “altcoin season”, the impact is also felt on the price of Bitcoin, which tends to rise again. Generate a really good circle shape for the crypto market.

However, compared to 2021, some aspects have changed significantly. The fall in the level of market liquidity was influenced by the Federal Reserve and its policy of raising interest rates. However, liquidity inflows appear to be a key factor in a bullish rally. So it’s hard to confirm that this return of Bitcoin dominance is strong essential vector of recovery in the article market.

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