Bitcoin’s dominance in the cryptocurrency market has risen to its highest point in two years. Currently standing at 58%, the ratio of dominance is a measure of the market cap of Bitcoin compared to the total market cap of the cryptocurrency sector, which is currently at $1.18 trillion.
2020 began with an estimated 70% dominance and dropped to the mid-50s as the world transitioned from loose monetary policies to tight ones, while scandals like the collapse of FTX and the shocking deception revealed.
The total market capitalization of cryptocurrency reached $3 trillion in November 2021, with Bitcoin’s market cap peaking at $1.28 trillion and its dominance dropping to 43%.
However, as the macro-climate is still uncertain, and with employment and inflation still high, Bitcoin’s dominance has risen and appears to be in an uptrend again.
Two points could explain why this time is different. The first is, well, obvious: past cycles aren’t indicative of future ones, and this is especially true for Bitcoin, as it has only traded with reasonable liquidity in the past five years.
The second is the US regulatory crackdown on crypto, with many tokens being declared as securities. This has led to Bitcoin carving out its own niche as institutions reconsider their role in the market.
Blackrock and Fidelity, two of the world’s largest asset managers, have both filed for spot ETFs, which could do wonders for liquidity.
It’s hard to ignore the fact that Bitcoin has its head and shoulders higher than the rest of the group, and as bad as crypto is, the market never gets boring. With all these factors in mind, only time will tell how the dominance of Bitcoin will play out in the coming months.
