On-chain data shows that altcoin volume dominance is now at the highest level since January 2021, while Bitcoin’s is at its lowest.
Altcoin dominance by volume recently hit a high of 64%
As noted by an analyst in a CryptoQuant to post, Bitcoin dominance is only 16% now. “Volume dominance” is an indicator that measures the percentage of total cryptocurrency market trading volume that a specific coin contributes to.
When the value of this metric increases for any crypto, it means that that particular crypto is seeing a greater amount of activity relative to the rest of the market currently. This suggests that the coin is attracting more interest from investors at the moment. On the other hand, low values may imply that the crypto is losing attention at the moment, as its volume percentage is declining.
Now, here’s a chart showing the trend in volume dominance for the entire altcoin sector combined (minus Ethereum), as well as Bitcoin, over the past two years:
The two metrics seem to have gone opposite ways in recent days | Source: CryptoQuant
As shown in the chart above, Bitcoin’s dominance by volume has declined sharply recently, touching a value of just 16%. This is the lowest value that BTC has seen in recent years.
Altcoins (aside from Ethereum), by contrast, have seen their dominance soar in the past week, as the metric is now worth 64%. This suggests that BTC has recently lost its market share to these alternatives.
However, the analyst considers that this trend is “very worrying”. The reason behind this is the fact that every time altcoins have started with altcoins at the top, they usually haven’t lasted very long, and prices have gone back down quickly.
This can be seen very clearly on the chart. For example, the highs of both 2021 bull rallies (those in the first and second half of the year) were formed, while altcoins dominated higher trading volume than Bitcoin. The latest FTX crash also took place while alts were dominating the market.
It would seem that, in general, any sustainable and healthy price increases only started with BTC dominance being higher than these alt. One prominent example is that the July 2021 bottom, which kicked off the second half 2021 bull run, took place with Bitcoin volume percentage higher than altcoins.
The entire market has been rallying in the past week, but if the historical pattern is anything to go by, this improvement may not last too long as altcoin dominance is at very high levels right now. This would spell trouble not only for Bitcoin but for these same alternates as well.
Bitcoin price
At the time of writing, Bitcoin is trading around $17,400, up 3% in the past week.
Looks like the value of the crypto has gone up over the last few days | Source: BTCUSD on TradingVIew
Featured Image by Art Rachen on Unsplash.com, Charts from TradingView.com, Arcane Research
