Bitcoin Dominance Rate Spikes
On July 23, 2018, the world’s number one digital asset, Bitcoin posted its highest levels of dominance of the cryptocurrency market in terms of market capitalization since December of 2017.
Market Dominance
Dominance of a specific cryptocurrency is calculated as a percentage of the total market capitalization of all cryptocurrencies. The first thing that dominance of a cryptocurrency indicates is how much in demand it is in comparison to other cryptos. So, the higher the dominance, the higher the demand for that cryptocurrency.
Data taken from CoinMarketCap shows that Bitcoin’s dominance of the market is now 46.7%, which is the highest level that the crypto has reached since December 22, 2017. It is also the first time that the world’s most valuable crypto crossed the 46% mark since then.
Over the last one week, sentiment towards Bitcoin has turned positive once again, taking the price of the crypto up by 15% in that time. The price of Bitcoin also hit a two-month high and is currently trading, at the time of writing, at $7,946.99 per token.
In contrast, other major altcoins have been struggling with gains, hardly making any gains in the same time period.
Interpretation of This Data
The rally that Bitcoin has shown from its 7-month low of less than $5,000, along with a rising dominance in the cryptocurrency market is an indication that bargain hunters (those who buy low), are still betting on further gains in Bitcoin’s prices and are not looking at altcoins as an option for investment.
Usually, if investor confidence is low in BTC, then there should be a correspondingly sharp rise in altcoin dominance in the market as investors move their money away from BTC into other cryptos. However, that is not the case here. The fact that Bitcoin is rising much higher than all the other altcoins is a clear indication of investor confidence in the digital asset.
If this trend continues, then BTC should soon see the $8k mark too.
Market Reactions
Market capitalization may not be the best way to test a cryptocurrency’s actual health. However, it still has a positive impact on perceptions, with people in the industry being enthusiastic about BTC’s performance.
Market analysts, on the other hand, are a lot more skeptical about Bitcoin’s performance. Crypto-commentator WhalePanda stating that using market dominance as an indicator of a cryptocurrency’s (read: Bitcoin’s) health was not the right gauge of performance.