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Bitcoin’s market dominance hits a 4-year low under sustained volatility

Bitcoin's market dominance hits a 4-year low under sustained volatility
Paul L.

Bitcoin (BTC) has for long retained its position as the most dominant cryptocurrency in terms of capital inflow powered by factors like being the flagship digital asset. However, its dominance continues to drop as the asset battles one of the longest crypto winters. 

In particular, as of October 6, Bitcoin market dominance hit the lowest point in four years at 39.06%, with a capitalization of $387.85 billion. Ethereum (ETH) ranked second with a market capitalization of $166.61 billion, accounting for a dominance of 17.3%, according to CoinMarketCap data. 

Major Cryptoassets By Percentage of Total Market Capitalization (Bitcoin Dominance Chart)

It is worth noting that Bitcoin’s falling market share aligns with the asset’s sustained volatility partly triggered by prevailing macroeconomic conditions like high inflation and interest rate hikes. 

Implication of Bitcoin’s falling market share 

In this case, the sliding share has several implications, like putting into question the asset’s ability to act as a store of value and hedge against inflation. 

At the same time, the market cap movement partly indicates that interest in Bitcoin from retail investors appears to be low due to the loss-making aspect amid depressed activity from institutional investors. Notably, besides the volatility, the regulatory aspect is keeping institutions away at the moment. 

Historically, Bitcoin’s drop in market dominance has impacted the general market helping dictate the next price action of other assets like altcoins. In most cases, capital exiting the Bitcoin space is channeled to altcoins positioning them for a rally. However, that is not the case since altcoins are still trading in the red zone. 

In periods of market downturns, altcoins appear to be more attractive investments for those looking for quick gains. 

Despite the shift in market dominance, Bitcoin has indicated signs of recovery as the asset attempts to exit the bear market. By press time, Bitcoin was trading at $20,130, extending its consolidation around the level. 

The Ethereum flippening factor 

Furthermore, a section of the market has suggested that Ethereum stands a chance to flip Bitcoin in market capitalization. Although Bitcoin launched a DeFi on Bitcoin feature in 2021, Ethereum boasts of more use cases powering elements such as decentralized finance (DeFi). 

It is worth noting that the possibility has accelerated following Ethereum’s shift to Proof-of-Stake (PoS) protocol after the Merge upgrade. The upgrade is touted to make Ethereum a deflationary and environmentally friendly asset, a factor likely to attract more institutional capital. 

Finally, the Bitcoin market’s dominance will likely slide in the future as more assets with strong cases enter the space. For instance, Bitcoin is among the assets with the least ongoing network activity, elements likely to impact capital inflow. 

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk. 


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