Introduction
Bitcoin dominance is an important factor witnessed largely during the bear season. During such a period when the prices of all the cryptocurrencies have attained new lows including Bitcoin, investors are usually attracted to begin filling their bags again with the most trusted cryptocurrency which is Bitcoin before ever proceeding to acquire altcoins. This had always given Bitcoin a strong dominance over every other cryptocurrency at the apex of the bear season. The fact that Bitcoin’s dominance still rests at 37% today when many analysts are calling for the bottom and expecting a bull run has given investors more cause to be afraid.
The important questions raised here are: Does it mean the market has not Bottomed yet that investors have not been attracted, to begin with, Bitcoin? Or has Bitcoin lost its relevance in the market that traders are now filling their portfolios with different assets? These important questions seeking answers have been examined in this work.
What is Bitcoin Dominance?
Bitcoin dominance is used to describe the tendency for Bitcoin to attract more investment over every other cryptocurrency in the market today as a result of being the most trusted cryptocurrency today. Often, Investors preferring to buy Bitcoin than altcoins gives rise to Bitcoin dominance.
Bitcoin dominance versus bear markets
Bitcoin dominance has always been pronounced in the market during the bear season from the history of cryptocurrency till this point. This is so as investors always considered it their first choice of investment when the prices of all digital assets are low again. Being the most reliable cryptocurrency Bitcoin had always dominated altcoins investments.
A clear case of Bitcoin’s dominance was experienced in 2017 during the Bullrun when Bitcoin was the most popular investment. During this period, Bitcoin’s dominance rose to 95% as there was no other strong cryptocurrency competing with it at this point after the previous crash.
This dominance was only reduced at the apex of the bull run during the boom of ICO in 2018 leading to the creation of multiple altcoins that diverted the investments that would have gone further into Bitcoin.
Altcoins including Ethereum, Terra, Polkadot, Cardano, Dogecoin Solana, Ripple, etc, rose to compete with Bitcoin thereby reducing its dominance in the market to roughly 35%.
A resurgence of Bitcoin’s dominance was seen again in 2019 after the massive fall with Ethereum losing more than 87% of its value after the attack on its blockchain. Bitcoin’s dominance at this point returned above 70% and maintained this till the apex of the bull run in 2021 when altcoins took over to print new highs again.
Given these precedents, one would have expected Bitcoin dominance to be so strong again during the apex of the bear market in 2022 but the reverse has been the case.
But why is Bitcoin dominance currently low at this point compared to previous years? Why are investors not yet attracted to Bitcoin at this point? We have discussed these two important questions below.
Why is Bitcoin dominance in 2022 lower than the previous bear markets?
The fact that Bitcoin dominance at this point had clinged to 37% at the height of the bear season has given investors more reason to be afraid. This is because Bitcoin has always been the preferred investment when the prices of every other digital assets are low again. Could it be that the market has not bottomed yet? Or have investors lost interest in Bitcoin? Of course, these are the two most important positions to hold at this point.
The current situation technically calls for more caution in crypto investment at this point until Bitcoin dominance manifests again to signal the beginning of another bull run.
Angela Spearman is a journalist at EzineMark who enjoys writing about the latest trending technology and business news.