Bitcoin dominance tops 50% for the first time in two years

For the first time in two years, bitcoin accounts for more than half of the market value of all existing cryptocurrencies with a total crypto market capitalization of $1.07 trillion. RBC Crypto.

On the night of June 20, the share of bitcoin (BTC) slightly exceeded 50% and, at the time of publication, was fixed at this level. According to TradingView, the Bitcoin dominance index at the time of publication is at around 50.41%. Bitcoin’s market share usually rises during cyclical downturns in the industry and declines during bull market periods when investors pour capital into other coins.

In the early years of the crypto market, bitcoin steadily accounted for its overwhelming share, but in 2018, the index of dominance of the first cryptocurrency fell to 34% before starting to rise again. In 2022, the crypto market collapsed amid a series of bankruptcies of major players, including the FTX exchange in November. At that time, the share of bitcoin was 38.

The growth of the bitcoin dominance index in the market is rather not a clear sign of something specific, but a consequence of the market situation, explains Nikita Zuborev, senior analyst at Bestchange.ru. According to his observations, this happens about every 4 years before the Bitcoin halving and lasts another six months or a year after it. The current rise in the index indicates that long-term investors prefer to invest in bitcoin, partly withdrawing funds from altcoins, and partly using capital inflows primarily to buy BTC.

Capital outflow

A similar dominance index for the second largest cryptocurrency by capitalization, Ethereum (ETH), is stable at 20%. The current increase in investor interest in bitcoin may indicate their increased caution regarding other cryptocurrencies. In early June, the US Securities and Exchange Commission (SEC) in lawsuits against crypto exchanges Binance and Coinbase called a number of cryptocurrencies unregistered securities. This decision led to the sale of these assets by market participants. Bitcoin is treated as a commodity by US regulators, which helped it not fall as much in price as the altcoins classified as securities did.

At the same time, such actions caused a sharp outflow of capital from altcoins and a decrease in prices for them, which ultimately led to a change in the balance between bitcoin and altcoins. According to Nekrasov, while “the story with the SEC and altcoins has not exhausted itself”, the flow of capital from altcoins to bitcoin will only increase, and this trend can be expected to continue – the bitcoin dominance index can grow to 55%.

If we exclude the largest stablecoins (cryptocurrencies whose exchange rate is pegged to the US dollar) from the total capitalization of the crypto market, into which capital from other cryptocurrencies is traditionally poured, the Bitcoin dominance index is already exceeds the expert’s forecast and is at around 57%.

In fact, the indicator itself is more important for the trend than for specific numbers, the analyst clarifies. The dominance index trend can be used as an indirect sign of determining the stage of market growth: usually it is a cycle of rising bitcoin, rising altcoins, rising “junk” assets, a hard fall of the entire market, and so on in a circle. If the dominance of bitcoin grows, it can be assumed that a new series of positive trends in the market has begun, although a number of other signs should be considered for a confident statement of this.