The cryptocurrency market is very volatile, interesting and also exciting. There are many different indicators that signal specific trends and bullish and bearish periods.
One of these indicators is related to the market dominance of Bitcoin (BTC), the largest cryptocurrency in the market.
Understanding Bitcoin Dominance
Until 2017, Bitcoin dominance never fell below 75%, according to data presented by CoinMarketCap.
In just a few days, in early 2017, altcoins such as Ethereum (ETH), XRP and Litecoin (LTC) surged massively. Meanwhile, Bitcoin domination fell to under 38% in mid-2017.
Since that moment, Bitcoin’s market capitalization started to fluctuate as never in the past. Despite Bitcoin reaching $20,000 at the end of that year, altcoins were experiencing large surges.
Since the bear market started in early 2018, things changed in the market. Altcoins lost their value, and Bitcoin started gaining more importance once again.
It is worth mentioning that during 2017 and early 2018, there were several tokens released to the market by Initial Coin Offerings (ICOs). Many of these tokens have already disappeared.
A few weeks ago, Bitcoin’s market dominance reached its highest point since early 2017. In September, its dominance hit 71%. Since that moment, it started falling once again and it is now close to 65.8%. This is the lowest point since July when Bitcoin was traded at its yearly highs of $13,750.
It is possible to see that small-cap cryptocurrencies could be starting a new bull market and Bitcoin a new bearish period in terms of dominance.
In general, altcoins tend to grow exponentially when they do it, considering they have low liquidity and are susceptible to large buy orders.
However, investing in small coins has higher risks than in established cryptocurrencies such as Ethereum, XRP or Litecoin, among others in the top 10. Nevertheless, top 10 cryptocurrencies tend to have lower returns than smaller cap coins.
The market could be entering a new stagnation phase for Bitcoin as it had between mid-2018 and the beginning of 2019.
Although the price of Bitcoin fluctuated, the dominance remained stable close to 50%-55% of the market. Other cryptocurrencies surged, while others remained stable. Thus, it is possible for altcoins to start a new bull market while Bitcoin remains traded sideways.
However, it is also worth mentioning that in May 2020, Bitcoin will experience a hard fork that will reduce miners rewards by half. This could be a bullish catalyst for Bitcoin and eventually harm altcoins at least for some more months.