By Pradeep Saran, September 20,2023
Bitcoin (BTC) has maintained a relatively stable price of $26,700 over the past month, with minimal fluctuations compared to other cryptocurrencies. However, during this time, its market dominance has been steadily increasing, posing potential challenges for other digital assets in the cryptocurrency sector.
The market dominance rate of Bitcoin, which measures its share of the total digital asset market, recently reached 50.2%. This marks its highest level in a month and comes close to the 26-month high of 52% recorded at the end of June.
To provide some context, Bitcoin’s market dominance had remained within a range of 39% to 49% for over two years. However, in June, it broke out to the 52% level following the news of asset manager BlackRock’s application for a spot Bitcoin exchange-traded fund (ETF), which raised hopes of significant inflows into the cryptocurrency.
Markus Thielen, the head of research at crypto services provider Matrixport, explained that Bitcoin is benefiting from the potential buying pressure generated by ETF listings. In contrast, alternative cryptocurrencies, often referred to as altcoins, are facing various risks. These risks include token sales by the bankrupt exchange FTX, declining revenues in the Ethereum protocol, and upcoming token unlocks that allow venture capital investors to sell tokens.
Thielen pointed out that while Bitcoin reached its peak for the year in July, Ethereum (ETH) reached its peak in April. He noted that despite the numerous ETF announcements, altcoins, including Ethereum, have not seen significant benefits.
Macro analyst Noelle Acheson suggested that Bitcoin could further benefit from recent regulatory changes proposed by the New York Department of Financial Services (NYFDS). These changes include stricter rules for listing cryptocurrencies on exchanges while simultaneously allowing Bitcoin to be green-listed as a digital asset that license holders can list or custody without additional regulatory hurdles.
Acheson speculated that these regulatory changes could lead to more investors shifting their focus towards Bitcoin, considering it a “safe” crypto asset.
In summary, Bitcoin has maintained its price stability while increasing its market dominance, potentially posing challenges for other cryptocurrencies. This trend could be influenced by factors such as ETF listings and regulatory changes favoring Bitcoin. Meanwhile, altcoins face various risks and have not seen the same level of benefit from recent developments in the cryptocurrency market.