As I write, bitcoin dominance, a metric that is usually used to compare bitcoin's share of the overall crypto market capitalization relative to other cryptocurrencies (known as altcoins), has peaked at 65% even as bitcoin sets a new yearly all-time high at $14,500. The last time the bitcoin dominance reached a record 65% was in June this year, the month following its halving, when the noble coin was trading at the $9k range.
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As you would expect, the major factor that determines the bitcoin dominance is the market sentiments. Generally, the bitcoin dominance goes up when market sentiments move in favour of bitcoin relative to altcoins and expectedly goes the other way once the opposite happens. In the past two months, the altcoin market had relatively flourished relative to bitcoin, as we especially saw DeFi tokens hitting the roof; so it is not out of place that the trend has now turned in favour of bitcoin.
The new sentiments towards bitcoin is not unconnected to the recent events that have continued to give impetus to a potential higher high for the price of bitcoin. Therefore, we see a large chunk of the crypto money moving towards bitcoin.
The implication is that a rising bitcoin dominance is always, at least in the short run, a bad sign for altcoins. Historically, it is either altcoins remain static and sluggish during the rise in bitcoin dominance or it decline in price. In this case, we are already seeing both - high cap altcoins are generally sluggish while DeFi-related tokens have declined considerably.
We can expect that in the weeks ahead altcoins will only begin to join the party once it has become evident that bitcoin is slowing down, has run out of momentum. Only then will some of the monies made from bitcoin will gradually flow back into altcoins to give them a chance. If not, we should probably be ready for a bitcoin ride while the altcoin market crawls behind it.