Bitcoin has broken strongly higher over the past few days after consolidating in the low-$11,000s. The leading cryptocurrency currently trades above $12,000, which has been highlighted by analysts as an important level of technical resistance.
It isn’t clear what exactly is driving Bitcoin higher in the near term, but oft-mentioned narratives include the continued push towards central bank digital currencies, institutional accumulation, and a falling U.S. dollar due to stimulus.
The move higher comes as altcoins have plunged lower.
Eric Wall, CIO of Arcane Assets, shared the chart below amid Bitcoin’s move higher, highlighting how during the surge, altcoins, especially coins pertaining to decentralized finance (“DeFi”), actually lost value against Bitcoin and the U.S. dollar.
As the chart shows, over the past week, the price of Ethereum has dropped 5.5% as Bitcoin has gained 2.7% over that same time frame. It’s been an even worse past day for smaller altcoins, which have dropped 5-10% as Bitcoin has rallied.
Investors in the space expect the trend of Bitcoin strongly outperforming altcoins to continue.
Kyle Davies, a co-founder of forex and cryptocurrency fund Three Arrows Capital, wrote on October 19th that the market is “about to find out why all of the rich OG’s hold mostly BTC.” He added that Bitcoin could see a “dominance” move, whereas it will push dramatically higher as capital in altcoins cycles into Bitcoin.
Su Zhu, his business partner at Three Arrows Capital, echoed the sentiment.
“$BTC going up swiftly is not only not bullish for alts but it’s bearish. reasons for this are myriad but boil down to the fact that money is a coordination game and Bitcoin is the Schelling point; this is independent of how you feel about it, community is literally irrelevant.”
Responding to a critic of his sentiment, he added that he doesn’t expect serious capital to flow back into altcoins until Bitcoin “is in the 40-70k range.”
Su Zhu has previously said that inflationary trends are preparing to drive Bitcoin towards $50,000 and beyond.