According to data from TradingView.com on September 17, 2024, Bitcoin market dominance (BTC.D) has crossed 58% for the first time since April 2021.
Altcoin Season On The Horizon?
Bitcoin dominance essentially tracks the percentage of the total cryptocurrency market cap controlled by BTC. BTC.D has reached levels it had seen three years ago in April 2021. As of September 17, BTC commands a market cap of $1.16 trillion.
The multi-year high level of BTC.D could have several implications for the altcoins market. A high dominance could trigger the famed “‘altcoin season,” a period where altcoins tend to outperform BTC price action significantly.
This trend was last observed following the COVID-induced crash of 2020 when the decentralized finance (DeFi) ecosystem piqued industry interest. Several DeFi protocols witnessed huge price appreciation in their tokens, such as AAVE, SushiSwap (SUSHI), Synthetix (SNX).
Stephen Cook, Founder and CIO of Dira Capital, observed that Bitcoin dominance “is likely close to being done.” He added that it might take a few more months for the metric to reach more than 60%. Cook’s thoughts were echoed by crypto analyst Cryptollica, who noted that BTC dominance may tumble to 35% by mid-2025, potentially paving the way for a 2025 altcoin rally.
A rise in BTC.D could indicate renewed interest in the premier cryptocurrency from institutional and retail investors. After hitting a peak, BTC.D may start sliding down, giving some liquidity to altcoins as the wider crypto market sentiment improves.
High Bitcoin dominance might provide a sense of perceived stability to investors, who might be encouraged to enter riskier trades in the altcoin market as BTC continues trading in a tight price range. Subsequently, the more risk-seeking investors could buy promising altcoins at a lower price, allowing them to make big gains once Bitcoin dominance starts declining and capital flows into altcoins.
The chart shows that Bitcoin dominance has been on a steady uptrend since at least November 2022, when it stood at 39% and created a double-bottom.
At the time, BTC price was hovering around $20,000 as the US Federal Reserve (Fed) had already started hiking interest rates to combat inflation amid a tight post-COVID labor market.
The Case For Further Altcoin Decimation
Conversely, one cannot completely rule out the possibility of Bitcoin dominance hovering around current levels for some time while altcoins bleed. The proportion could rise further, as emphasized by cryptocurrency trader Rekt Capital, who noted that BTC.D hit a weekly closure above 57.68% for the first time since April 2019. They added:
The last time such a weekly close occurred, it kickstarted a multi-month Bitcoin dominance uptrend to 71%.
In such a scenario, expect more pain for altcoin holders as their holdings severely underperform Bitcoin, leading to a loss of investor interest in small market cap tokens, further depressing their price. At press time, Bitcoin is trading at $59,218, up a modest 1% in the last 24 hours.
