If you’ve been following the most recent price action in the crypto markets, you’re probably wondering what’s going to happen within the next couple of weeks – especially if you’re holding some altcoins.
Will the bull market be kind to the majority of cryptos like in 2017? Or will we see a sudden drop in interest around altcoins as Bitcoin’s market dominance continues to rise?
Bitcoin and the broader cryptocurrency market underwent a sharp correction on Sunday, knocking more than $20 billion off the total market capitalisation in less than 24 hours. The pullback followed a brief period of consolidation that saw Bitcoin struggle to get back above the $12,000 mark.
All of the top-20 coins reported losses on Sunday, with Bitcoin falling 6.9% to $11,155, according to TradingView. With the reversal, Bitcoin’s market cap has slipped back below $200 billion for the first time since last Thursday.
Bitcoin dominance on the rise
Even though many cryptocurrency enthusiasts and investors are still hoping for an altcoin bull season, the data shows that BTC market dominance is once again on the rise – and it is showing no signs of slowing down.
At the time of writing, Bitcoin’s market dominance is sitting close to 65%. What this shows us is that investors have been betting heavily on Bitcoin and are not so sure about altcoins – even major ones. Apart from Litecoin and Binance Coin, most of the top-10 cryptocurrencies have been underperforming against Bitcoin during 2019.
It seems some lessons have been learned from the ICO craze of 2017/18. Of course, we now have the rise of IEOs, which aim to “disrupt” how cryptocurrency projects raise funds by giving the gatekeeping power to exchanges – entities that have proven time and time again to be untrustworthy.
My guess is that Bitcoin market dominance will keep rising until it breaks new all-time highs. There is little evidence that shows an opposite path developing ahead, as most institutional investment is focusing on Bitcoin.
Will altcoins recover?
There are a couple of things I would like to focus on in this graph.
First, let’s take a look at that beautiful pink trend line that started at the top of the bull market in early 2018 and is still going today. What this shows is that bear markets are extremely painful for altcoin holders – but that is not news. More interestingly, we can see there’s a trend for Bitcoin to keep gaining dominance past 70%.
If what I believe is correct and Bitcoin dominance grows another 10% before it stabilises, what will happen to altcoins? Well, for starters, I believe most will never recover. The ones that do will moon past previous highs as well.
Another interesting indicator is the volume profile on the left, which shows us that Bitcoin’s dominance just crossed an important level: 60% dominance. This level had the most volume both from Bitcoin buyers and sellers.
Now that volumes are super thin, I expect Bitcoin to reach $20,000 by the end of the year, and when price plateaus, new entrants will look toward altcoins for gains.
We can’t forget that one of the most important drivers of human behaviour is greed. FOMO is what pumps price past previous highs and is what brings new people into the market. Despite everyone, or mostly everyone, saying volatility is bad for Bitcoin and for the cryptocurrency market in general, they seem to forget that without great volatility, there’s no room for huge price swings.
And what attracts traders and new entrants the most?
Bitcoin dominance is clearly on the rise, and it will keep going until it reaches a maximum of 80%. I believe that will happen close to the top of the current bull cycle, and afterwards we’ll see investors and traders switching to altcoins for gains.
If you want to get into the market, look at the top performers of 2019, like Litecoin (LTC) and Binance Coin (BNB), and think of what will happen to those coins when Bitcoin dominance declines. I’m pretty confident their prices will go berserk and power past previous highs.