Will BTC’s 70% Dominance Soon Give Way to an ‘Alt-Season’?


Things have been pretty peachy in BTC world for the past several months. After the “crypto winter,” a year of price drops and doldrums, crypto spring sent BTC rising back up; crypto summer has sustained the price over $10,000.

Now that we’re entering into autumn, a rather unique set of circumstances has the market poised to move in either direction. Perhaps most notably is the fact that for the last several weeks, BTC dominance–the ratio of capital in Bitcoin markets to the amount of capital in altcoin markets–has been hovering around 70 percent, the highest that it has been since July of 2017.

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Marc Bhargava, Co-founder and President of digital asset trading platform Tagomi, told Finance Magnates that that figure could be even higher.

“[The] key insight here is that dominance is actually higher than reported since more of the alt market caps are not liquid. BTC dominance could be closer to 80%,” he said. “On CoinMarket Cap, it says bitcoin dominance is 68%, but includes a lot of questionable exchange volume plus many tokens outside the top 15 which really aren’t tradeable in meaningful size. Therefore, the market caps are not correct.”

The rise began to pick up speed in late April, several weeks after the first in a series of strong upward price movements in BTC. On April 1st, the price of BTC was roughly $4,132; by the end of the month, it had surpassed $5,200. At press time, BTC was trading for $10,270, up a fraction of a percent over the last 24 hours.

What’s driving Bitcoin dominance up? And where do we go from here?

Bakkt launch could be driving both BTC price and BTC dominance

Several events over the course of the last two months have been speculated as being the driving force behind the latest upward movements in BTC dominance.

The most “popular” theories seem to be connected to two announcements of institutional products: first, the announcement that the Intercontinental Exchange-backed cryptocurrency futures trading platform, Bakkt, will finally launch after a year of delays; second, the launch of VanEck/SolidX’ so-called “limited ETF”, and the upcoming October SEC decision on the full ETF.

A number of analysts have predicted that the launch of Bakkt will bring a wave of institutional capital into cryptocurrency markets (particularly Bitcoin’s); as such, it’s possible that a number of holders have been stocking up on BTC in anticipation of a possible price run.

Alternatively, institutional traders may even already be depositing BTC into Bakkt trading accounts in preparation for the launch.

In fact, a massive transaction earlier this month involving the sending of 94,505 BTC (worth roughly $1 billion) to a Bitcoin wallet earlier this month was widely speculated to be a such a deposit.

Could ETF drama be a factor?

The launch of the so-called “limited ETF” by Van Eck and SolidX did not bring in nearly as much capital or interest from investors as was originally anticipated. As of September 12th, roughly $41,000–the equivalent of just around 4 BTC–had been invested in the product.

Still, the launch of the limited ETF has brought more media attention onto the fact that the SEC must make a final decision on Van Eck/SolidX’ application for a Bitcoin ETF this coming October, after months and months of delays.

However, in a LinkedIn post, Michael Creadon, Head of Institutional Sales at DrawBridge Lending, warned about the possible negative consequences of this limited ETF: “I get nervous when I see stories about backdoor, ‘technical’ SEC rulings,” he said, referencing the fact that the limited ETF was created on the basis of SEC exemption 144A.

“All the SEC rules are technical. Do you mean to tell me we’ve been awaiting BTC ETFs for 5 years & only now some attorney cracked the code & read the entire rule book? I’ll give an example: our firm can’t face retail investors because we use swaps. That’s the rule–period.”

Creadon also pointed out that the media cycle–and the price movements that have followed–surrounding the Van Eck/SolidX Bitcoin ETF has all become a bit too speculative: “coming from Chicago where futures and options rule supreme I think the BTC ETF melodrama is a bit overblown,” he wrote. “but hey, all new derivatives are a positive and I respect the heck out of the Van Eck team’s perseverance. And I hope that this approval’ is fully in lockstep with the regulators in Washington so we don’t have to take another mulligan.”

When compared with BTC, altcoins are way down

Whatever the cause, crypto market analyst Willy Woo pointed out that the effect of the rise in Bitcoin dominance has been–well, not great.

This becomes particularly clear if altcoin prices are measured in BTC rather than USD. Woo showed this in a rather aesthetically pleasing chart on Twitter:

In any case, the market is poised for a powerful move–only time will tell what happens next.

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