On-chain data shows the dominance of altcoins trading now more than 50%; here’s what this could mean for Bitcoin.
Altcoin Trading Dominance Increases Over 50%
As indicated by the analyst in the CryptoQuant post, a sustainable movement in the market usually starts with Bitcoin going up first. The “trade dominance” indicator measures the percentage of the total trading volume contributed by crypto.
When the value of this metric increases for any coin, it means that the coin’s volume share will rise, indicating that there is increased trading interest from investors. On the other hand, a declining dominance indicates that the coin has lost ground because there are not many trade holders compared to the rest of the market.
Historically, Bitcoin and Ethereum have dominated most of the market volume, as their combined dominance usually remains above 50%. However, there are also some points where altcoins (other than ETH) have changed the picture.
The chart below shows the dominance trend of this altcoin over the past year and a half:
Looks like the value of the metric has seen some rise in recent days | Source: CryptoQuant
As shown in the chart, the dominance of altcoins (minus Ethereum) has recently increased, and the metric value is now more than 50%. These numbers have highlighted what happened before the trend in the chart.
It will be seen that usually whenever these altcoins have occupied the majority of trading volume, the price of Bitcoin has followed up with some decline. According to analysts, altcoin dominance generally rises above this mark when investors get bored with BTC, so they start trading alts. Since these coins, in general, have a higher risk than BTC, their value is fragile and easily underestimated.
Because of this, price movements that start with altcoins can become unstable. The number notes the ICO bubble of 2018, the bull run in the second half of 2021, and ETH joining as some extreme examples. On the other hand, the movement where Bitcoin has rallied first, and Ethereum / altcoins following has been more healthy and sustainable.
If the historical occurrence of altcoin dominance rising above 50% is anything to go by, Bitcoin will probably go down. However, this is not always the case, as there have been several spikes above this level before that never had any visible effects on the market. Also, even if there is a decline, the degree may not be the same as in some previous examples.
The price of BTC
At the time of writing, Bitcoin is trading around $16,800, up 1% over the past week.
The value of the crypto seems to have moved sideways over the last couple of days | Source: BTCUSD on TradingView
Featured images from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com