The cryptocurrency market is experiencing a significant shift, with Bitcoin (BTC) dominance reaching a new cycle high of 58.91%. This level has not been seen since April 2021, and it’s a clear indication that the largest cryptocurrency by market capitalization is gaining traction.
Market Movement on Wednesday
On Wednesday, the cryptocurrency market as a whole continued to move higher, led by Bitcoin (BTC). The price of BTC rose above $68,000 for the first time since late July, extending its week-over-week gain to more than 12%. In contrast, the CoinDesk 20 Index, which tracks the performance of the top 20 cryptocurrencies, gained just 9% over the same period.
Bitcoin Dominance: A New Cycle High
The rise in Bitcoin dominance is a significant factor in the current market movement. According to TradingView’s TOTAL, which shows a total crypto market cap of $2.281 trillion and $940 billion when excluding Bitcoin, the largest cryptocurrency now accounts for 58.91% of the total market capitalization. This is a new cycle high and marks the strongest reading since April 2021.
Historical Context: Dominance Levels
Bitcoin dominance rose to above 70% at one point during the 2020-21 bull market before declining to as low as 40% in mid-2021. The dominance levels hovered around those ranges for more than a year, finally bottoming alongside the collapse of crypto exchange FTX in late 2022. Since then, there has been a steady rise in Bitcoin dominance, which has continued up to the current time.
Ether’s Relative Underperformance
Behind much of Bitcoin’s rising dominance is the relative decline in the second-largest cryptocurrency by market capitalization, Ether (ETH). The current ether/bitcoin ratio of around 0.03850 is at its weakest level since April 2021. A closer look at the ETH/BTC ratio from its cycle bottom in June 2022 shows a continuing series of weaker lows.
Comparing Performance
In previous cycles, such as the 2016-2019 and 2019-2022 periods, the ETH/BTC ratio was at least 200% higher from the cycle low at this point. However, the current ratio is 25% beneath its June 2022 cycle low, highlighting Ether’s underperformance against Bitcoin.
ETH/BTC Ratio Performance Since Cycle Low
According to Glassnode, Ether has outperformed Bitcoin in just seven of the past 23 months. Its most recent month of relative outperformance was back in May 2024. This highlights the significant gap between the two largest cryptocurrencies by market capitalization.
Market Implications
The rising dominance of Bitcoin and the underperformance of Ether have significant implications for the cryptocurrency market. As the largest cryptocurrency gains traction, it’s likely that other assets will follow suit, leading to a broader market movement. However, the decline in Ethereum’s relative value could also lead to increased demand for alternative assets.
Key Takeaways
- Bitcoin dominance has reached a new cycle high of 58.91%, marking the strongest reading since April 2021.
- The rise in Bitcoin dominance is largely due to Ether’s relative underperformance, with the ether/bitcoin ratio at its weakest level since April 2021.
- Historically, such a significant gap between the two largest cryptocurrencies has led to a broader market movement.
- As the largest cryptocurrency gains traction, it’s likely that other assets will follow suit.
Conclusion
The rise in Bitcoin dominance and Ether’s relative underperformance are significant factors in the current market movement. As the largest cryptocurrency continues to gain traction, it’s essential for investors to understand the implications of this trend on the broader market. With a deeper understanding of these factors, investors can make informed decisions about their portfolios and position themselves for success in the rapidly evolving cryptocurrency market.
