Bitcoin (BTC) dominance, which is a measure of the benchmark cryptocurrency’s market capitalisation against the entire crypto space, has been in steady decline since 25 October.
Having opened the year in the low 40% range, dominance peaked above 54.3% before sliding back below 53% at the time of writing.
What is this decline in bitcoin dominance telling us about the wider market?
“BTC dominance typically shifts in two key moments of market cycles: after reaching a peak and entering a downtrend, and after reaching a low and commencing a new cycle,” explained Matteo Greco, research analyst at Fineqia International. “The recent shift indicates new investors entering the market, as it follows a long period of market downtrend.”
Greco continued: “The rise in BTC dominance over the past few weeks resulted from investors exiting various altcoin positions and shifting their focus to BTC, awaiting the chance to redirect these funds into emerging altcoins for the upcoming cycle.
“The decline in dominance after five consecutive weeks of increase marks the first signs of heightened investor interest in altcoins, suggesting a riskier market stance.”
This riskier stance comes amid a pause in interest rate hikes across the Western economies, with the Bank of England and the US Federal Reserve signalling an end to their punishing fiscal tightening policies.
With the prospect of lower rates on the way (despite a higher-for-longer narrative forming), investors could be more likely to gamble with riskier cryptoasset classes, even if their utility and fundamentals are a matter of debate.
Despite bitcoin’s reduced market dominance, the world’s largest cryptocurrency’s spot price remains steady, with another percentage point added to the BTC/USDT pair on Tuesday.
Markets have been uneventful this morning, with the pair currently swapping for $35,320.
Year-to-date performance remains a bullish 113%, far outpacing major global equities indices.
Bitcoin has more than doubled its spot price in 2023 – Source: tradingview.com
Which altcoins are gaining against bitcoin?
Although the second-largest cryptocurrency Ethereum (ETH) gained against bitcoin in the prior week, the ETH/BTC pair has since fallen off.
Ripple (XRP) has stepped up to the plate, gaining around 13% since the start of November.
Solana (SOL) has also posted double-digit gains against bitcoin, while Cardano (ADA) pumped nearly 20%.
Other major altcoins, including Dogecoin (DOGE) and BNB, have also gained against bitcoin.
It should also be noted that the benchmark stablecoin Tether USD (USDT)’s market cap ramped up in recent weeks.
Since mid-October, total USDT in circulation has increased from $83.5 billion to $86.1 billion.
Tether is one of the main conduits for moving funds into the cryptocurrency markets, so this signals an uptick in investor interest in the wider crypto markets.
Global cryptocurrency market cap has shot higher as a result, totalling $1.34 trillion as of 8 November.