Analyzing Bitcoin Market Dominance Against Altcoins

Analyzing Bitcoin Market Dominance Against Altcoins


It’s that time of the year again where Bitcoin has been going higher while altcoins are getting dumped. It’s similar to earlier months of this year as well as the middle of last year, where whales dumped their altcoin holdings to chase gains in Bitcoin. Many altcoin hodlers are getting desperate and keep blaming the market crash, which (if you think about it) is not true. As long as Bitcoin is still going up, the market is still bullish. And yes, it’s absolutely normal for whales to pump Bitcoin after previously they pumped altcoins.

It’s actually wise to try to analyze everything from both fundamental and technical perspectives. Crypto trading is not that much different from stock trading or physical metal trading. You need to be able to understand that nothing lasts forever, including altcoin gains.

Trend Shifts

To understand the bigger picture, first, let’s take a look at Bitcoin’s market cap dominance. As you can see from this weekly chart, Bitcoin is having an upward trend against altcoins. And as you can see from the previous bars, the market has been shifted over and over again. There were days and weeks when Bitcoin market dominance kept going down, and there were weeks when Bitcoin market dominance kept gaining momentum. A bullish trend for BTC market cap dominance typically lasts for a much longer time.

Because of this reason, many analysts also predict that the current trend shift from altcoins to Bitcoin market dominance will continue for the foreseeable future. When it approaches the upper resistance level (68.5% and 72%), there’s a big possibility that whales might pour their money back to altcoins from BTC. But until then, the trend might still heavily be in Bitcoin dominance’s favor. Of course, nothing is certain, and this is not financial advice. I’m just saying that it’s absolutely normal for Bitcoin to regain its dominance against altcoins after a series of bearish weekly bars as you can see from the above chart, although admittedly, anything can happen.

Also, read more about what is stablecoins and how do they work?

Fundamentally, Altcoins Have To Go Down

So, let’s stop talking from the technical perspective. How about fundamental analysis? Well, if you look at the DeFi trends in the middle of the year, many DeFi-related tokens went up by 5x or even 10x. That was not sustainable, especially in the time of the coronavirus pandemic when most people are careful to put new money into the crypto market (and newer users typically put their money in BTC first and not in yield farming tokens).

Thus, it absolutely makes sense to see Bitcoin gaining ground while altcoins go down. Fundamentally, altcoins have to go down whenever there’s not enough new money to keep pumping those hyper-inflated yield farming tokens. The whales rather go to their expected “safe haven” outside the stablecoin market, which is Bitcoin itself. And when they expect a massive bull run in 2021 (just like in 2017 after 2016’s halving), I think every piece starts to make a lot of sense.

At the end of the day, traders love to see past price action to make their future decision. When they see 2016’s halving pumped BTC to a certain point before the altcoin market took over, they probably expect the same thing now. Remember that the biggest altcoin pump in January 2018 happened right after BTC broke it to $20K. And as soon as the altcoin pump was over, everything crashed for a year.

Therefore, when everybody thinks about the same thing, it’s absolutely normal to see the same traders trying to pump BTC to a certain price point before they think of pumping altcoins again. 

Another good explanation for this trend shift is the fact that the first U.S. stimulus package (back in March-April) saved the crypto market from the flash crash. And right now, we can see that many whales expect the second stimulus as soon as the U.S. election is over. And just like the first stimulus action, BTC pumped heavily, before the traders started to look for DeFi tokens. Perhaps it will be the same case this time. BTC has to pump massively before they start thinking of pumping altcoins again.