This article is also available in Spanish.
bitcoin's recent dominance in the cryptocurrency market has declined below 50%, indicating a possible adverse trend as retail activity increases. This change raises questions about market dynamics and investor sentiment.
bitcoin's dominance has been a critical indicator of whether the market is in a bullish or negative cycle throughout history. As bitcoin dominance grows, it typically means a defensive market where investors would prefer the relatively safer alternative of bitcoin” target=”_blank” rel=”nofollow”>bitcoin instead of altcoins.
Related reading
While a drop generally means that the investor is likely to increase their risk and very often prefers to invest in altcoins for possible higher returns.
crypto analyst Alan Santana identified three major warning signs for bitcoin dominance in an x post on Tuesday, as retail investors resumed trading after a long period of inactivity.
<blockquote class="twitter-tweet”>
twitter.com/hashtag/BTCdominance?src=hash&ref_src=twsrc%5Etfw” rel=”nofollow”>#BTCdomain 3 Bearish bitcoin Dominance Signs + Fibonacci Time Calculations
I would like to show here mainly three signals that can be considered bearish on this chart: bitcoin Dominance (btc.D).
1) There is a Doji on September 16. Getting to the top of a trend… pic.twitter.com/enQAeVo5MB
—Alan Santana (@lamatrades1111) twitter.com/lamatrades1111/status/1848485363251352028?ref_src=twsrc%5Etfw” rel=”nofollow”>October 21, 2024
The increase in retail activity
As bitcoin's supremacy wanes, retail investors are becoming increasingly active. Typically, this increase in retail participation is accompanied by a decrease in bitcoin market share as these investors move into altcoins in search of better returns.
The current situation is reminiscent of previous cycles, during which increased retail interest translated into a substantial decline in bitcoin/what-is-bitcoin-dominance” target=”_blank” rel=”nofollow”>The dominance of bitcoin. For example, bitcoin's dominance declined significantly during the 2021 bull market as new altcoins gained momentum, drawing attention away from the original cryptocurrency.
General change in investor mood
Market experts say this trend is not a one-time thing; It is a sign of larger changes in the way investors act. As non-fungible tokens (nft) and decentralized finance (DeFi) have grown, altcoins have become more attractive.
Many investors think that networks like ethereum, which support smart contracts and decentralized applications, are more flexible than bitcoin these days. This shift could be a sign of a larger shift in the way people think about and use cryptocurrencies.
Related reading
Fluctuation trends
bitcoin has seen a trend of fluctuations in its dominance since its creation in 2009. Starting with a market share of almost 100%, it began to slowly decline with the introduction of more altcoins.
bitcoin fell crucially during both the ICO boom of 2017 and the DeFi surge of 2021, at which point it fell to less than 40% dominance. Given such historical precedents, this could represent another phase in which altcoins outperform bitcoin, especially when retail interest is growing.
Experts believe this may cause cryptocurrency markets to become even more volatile in the future if this continues. Drops in dominance are often precursors to speculative trading, which subsequently causes the prices of both bitcoin and altcoins to fluctuate wildly.
The current level of bitcoin dominance works as an indicator of overall market sentiment. Many speculators are reevaluating their strategies as it continues to decline.
Featured image using Dall.E, TradingView chart
<script async src="//platform.twitter.com/widgets.js” charset=”utf-8″>
