Bitcoin’s dominance index is moving in growth territory in parallel with the recent price surge. The market value of the dominant cryptocurrency fell from 42K to 37K. However, its performance remains high compared to the previous months, marked by stagnation and low volatility.
Although predicting the direction of its price at this time is somewhat complex, some portals such as EQI claim that it could bounce and resume the rise. However, the price of the pioneer coin continues to lose ground dangerously, which could uncover a restless sell-off.
Regardless of the uncertainty in the current price of Bitcoin, what is clear is that its dominance over the rest of the currencies grew. The growth that the queen cryptocurrency experienced in this period of time, allowed it to have the highest dominance since May 21. At that time, it was located at 50.33% and from there it fell, last Saturday, it reported 49.36%.
What explains the dominance of Bitcoin?
The dominance of Bitcoin allows you to have an idea of the level of importance that the cryptocurrency has within this market. Being the first cryptocurrency, it stands as the one that takes the baton and the rest of the calls depend on its movements altcoins. In other words, if the price of Bitcoin rises or falls, these movements quickly “infect” the entire market.
That means that the dominance is high. At the time of writing, it stands at 46.39% according to TradingView data. If you compare it to other digital currencies like ETH, the second most important after Bitcoin, you will find that it occupies 18%.
It should be noted that this index tends to decline historically, due to the fact that new projects capture the attention of crypto enthusiasts. Another as much that plays here in the decrease of the market dominance, are the strengths of other blockchains, for example, in scalability and better commissions, which leads some users to exchange their bitcoins for other currencies.
However, one factor that should not be lost sight of is that Bitcoin’s dominance is unlikely to be displaced. This is because digital currency is considered a store of value with a citizenship card in the traditional market. The number of Bitcoin users does not stop growing (from 100 million in January to 220 in June), which gives it significant stability.
It is an index that rises at certain times
Now, if it is said that Bitcoin’s dominance in the crypto market tends to decrease as other currencies mature, why does it sometimes rise again? This is because, during or before bull runs, people play it safe and bet on the more traditional currency, in this case Bitcoin.
During the bull-run In late 2020 and early 2021, the Bitcoin dominance index reached an outstanding 72.70%. In other words, the rest of the cryptocurrency market as a whole, held 27.30%. In times of low volatility like the preceding one, people look for ways to keep up with the growth of their capital. To do this, they enter the DeFi or exchange other currencies.
In short, it can be said that the growth of dominance could indicate that the price of Bitcoin is preparing to rise. Despite the fact that the current price remains in a dangerous bearish state, it could be a simple correction.
Another as much that the graphs show is that, since the aforementioned date of July 31, the dominance trend has been clearly downward.