Bitcoin Dominance Increasing: The Impact On Altcoins
Hi Platinum Crypto Followers,
Hope everyone is ready for a bumpy ride this week, Bitcoin is extending the declines under holding just above 10,000 after failing to hold at $10,200 support. The declines follow the rejection from $11,000.
But today I wanted to examine and explain the volatile relationship Altcoins have with Bitcoin as a question I repeatedly get asked is “when is the next Altcoin season should I hold on to my Altcoins or convert to BTC only.”
To answer this question, we first must explore and understand the dominance of Bitcoin (BTC) and its current increase to approximately 70%, marking the highest value since the December 2017 Bull market. Bitcoin is the largest cryptocurrency with the highest market cap and trading volume in the cryptocurrency market. Of the average 24-hour market cap valued at $ 279.23B, Bitcoin holds $192.39B of the total amount with the rest of the altcoins having $86.89B.
BTC dominance gives the coin ‘power’ to control the market trends in the crypto space. This is so since Bitcoin’s trend greatly impacts Altcoins. Whenever Bitcoin experiences a bull run, Altcoins follow suit. However, a different trend is currently being experienced in 2019 where Altcoins were not pumping while Bitcoin’s price kept rising. This scenario has been experienced occasionally with things going back to normal after some time.
What is Bitcoin Dominance?
Bitcoin dominance refers to the ratio of the coin’s market cap to Altcoins market cap. Currently, this ration is at 2.215. Earlier in 2009, when Bitcoin was the only known cryptocurrency in the market, the dominance was at 100%. It however, later, reduced when Altcoins started gaining popularity. The dominance was at its lowest, 36.1% during the possible forking. The rise of other Altcoins such as Ethereum and Ripple also caused the decrease.
It is important to note that Bitcoin’s market dominance is not dictated by its price since it is only a ratio, not a value. This is so because the market cap is based on the number of coins circulating in the market.
Will Altcoin season ever return?
The question of whether bitcoin will ever lose its dominance to Altcoins is still a controversy. For the longest time, Altcoins have always been at the beck and call of bitcoin: the total market is being driven by bitcoin’s trends.
However, there have been some instances where all Altcoins have experienced a tremendously bullish short term run Altcoin bulls have termed this as Alt seasons. Since 2009 there have only been few attempts of alt seasons. The recent one occurred in late December 2017 to early January 2018.
An alt season will be experienced only when bitcoin loses its dominance in the Crypto market against most Altcoins. There have, however, been some Altcoins that are pumping contrary to the other Altcoins.
Litecoin (LTC) had experienced a spike in price in December 2017, making it reach an all-time high of $325.48. This was the same case with other Altcoins. However, Litecoin managed to maintain its prices above the previously set resistance level of $3.9.
The bears have tried to bring down the price to $77 on 16 August 2019 in a 24-hour chart. This value, however, is still high compared to the trend shown by other Altcoins. The Binance coin (BNB) is another Altcoin that has maintained an upward trend compared to other Altcoins.
Why are Altcoins not pumping?
Most Altcoins have been experiencing a bearish market movement for quite a while now. This situation is however not new. Altcoins are known to be having a downward trend or at most time they are stagnating.
Since 2009, Altcoins only pumped in December 2018 where the whole market experienced a massive price increase. Most of these coins managed to reach their all-time high prices after which they went back to the lows. Lately, Bitcoin’s prices have kept rising while Altcoins’ don’t.
The following may be reasons as to why Altcoins are not be pumping.
Low Trading Volumes
Unlike Bitcoins, most Altcoins are not widely used by people in the world. You will hear of one more firm adopting bitcoin or a country legalizing the use of bitcoin. This is not the case with Altcoins. Consequently, their trading volumes are always low.
Also, Altcoins have a very small retail market compared to Bitcoin. A small number of people in the Crypto space carry out their daily transactions using Altcoins. This, however, does not cut across all the Altcoins; some of the top ten Altcoins have market.
Many people are still not convinced that Cryptocurrencies, in general, are safe investments. Bitcoin has, however, gained trust over the years due to its dominance in the market. As for Altcoins, traders don’t deal with these coins because their prices keep on dropping every passing day. This unpopularity is shown by the low market cap of all the Altcoins adding up to $86 compared to Bitcoins $191.
The more dominant bitcoin is the lesser Altcoins rise. As long as bitcoin holds the 68% dominance in the crypto market, it will be hard for Altcoins to pump. This is so since all Altcoins follow bitcoin’s trend.
Whenever bitcoin’s price rises, Altcoins rise too but will never outgrow bitcoin. This scenario has created a perception among investors that makes them prefer trading with Bitcoin rather than Altcoins. Also, most Altcoins can only be exchanged with bitcoin before converting it into fiat currency. So whenever a bearish trend if expected, Altcoins holders immediately trade the coins for bitcoin.
Should you hold BTC or diversify into Altcoins
The question of whether or not to invest in Cryptocurrency is a very controversial matter. However, one can actually make good money out of this Crypto market. When deciding on whether to invest in a particular Cryptocurrency, it is wise to first know the market trends. The Crypto market keeps on changing with every passing hour.
Looking at the trends in the Crypto market, a lot of investors are holding on to Bitcoin and foregoing Altcoins. The market cap also indicates that more bitcoins are circulating in the market compared to all Altcoins.
More so, bitcoin has been recently referred to as the new Safehaven in the economic world. This was majorly supported by the recent China and US trade war that made investors turn to Bitcoin. Consequently, bitcoin prices rose to around $ 12200.
Investing in bitcoins seems like the best thing to do now, or maybe for the next few years. As much as all coins are considered as a risky investment, with bitcoin, it is safer. This is because;
- Of all the coins in the Crypto space that is over 1600, bitcoin is the most valuable and traded coin. This is because of its widespread adoption by different companies globally.
- It is the safest coin to invest in. This attribute comes with the fact that it was the first Cryptocurrency to be invented and that it has dominated the Crypto market. Besides, many exchanges deal in bitcoin compared to other Altcoins.
- Bitcoin has proven to be a reliable Cryptocurrency over the ten years it has been around. It has a promising future, and the earlier one invests the better.
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Live from the Platinum Crypto Trading Floor.