As the Market Bleeds, Bitcoin Dominance Hits Seven-Month High


Key Takeaways

  • Bitcoin’s market cap dominance is holding above 45% for the first time since October 2021.
  • The top crypto’s dominance over the market has surged since Terra’s implosion last week.
  • Bitcoin has historically dominated the market during bear cycles.

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Bitcoin has historically dominated the cryptocurrency market during downturns. 

Bitcoin Dominance Rallies 

Although the crypto market looks weak, Bitcoin is proving that it’s still “the King.” 

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The number one cryptocurrency has seen its market cap dominance soar this week, rising to 45.27% Thursday. Bitcoin’s dominance over the market last topped 45% in October 2021, weeks before it hit an all-time high above $69,000. 

Source: TradingView

Market cap dominance refers to the proportion of the market one asset represents. Bitcoin has historically been dominant during bear cycles, but it tends to make way for other assets such as Ethereum in bullish market conditions. Bitcoin’s dominance topped 70% shortly after it broke $20,000 for the first time in December 2020, but then faced a bleed throughout much of 2021 as other assets soared. Bitcoin’s dominance has been increasing throughout this year and has rallied over the past week. 

The crypto market has had a shaky month so far, with the global market cap plummeting from around $1.8 trillion to $1.3 trillion. Amid the volatility, Bitcoin’s performance has been weak. The number one crypto posted its eighth consecutive weekly close in the red this week, an unprecedented drop-off even by crypto standards. Per data from TradingView, it’s currently trading at around $29,800, falling short of the crucial psychological level above $30,000. 

Although Bitcoin has had a rough spell over recent months, true to bear market form, many other lower cap assets have fared much worse, which explains why its dominance is soaring. Many of the so-called “alternative Layer 1” networks that boomed in late 2021 have suffered huge losses amid the slump. Solana, for example, is 80.1% short of its all-time high, trading at around $52.23. Avalanche, another relative newcomer in the smart contract space, saw huge gains late last year, but has also declined in recent weeks. It’s 79.3% short of its peak, trading at about $30.16. Terra, one of the strongest performers of 2021, has also been wiped out following its devastating death spiral last week. 

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Interestingly, Bitcoin’s dominance increased as Terra started to collapse. The market was shaken by volatility over the course of the week, briefly causing USDT to lose its peg and panic-induced sell-offs across the board. While Bitcoin was shaken during the events, it’s held up relatively well against other assets. 

Bitcoin’s market cap is currently around $567.9 billion. Now in its seventh month of downward price action, it’s about 57% shy of its all-time high. 

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies. 

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