Bitcoin currently holds 65% more market share than the rest of the cryptocurrency space. However, except for the significant altcoins in the top 10 CoinMarketCap that do not seem to increase over Bitcoin, small-cap altcoins still can shine.
Altcoins had captured an enormous amount of market share from Bitcoin
With the advantage of being the leading cryptocurrency in the market, a few years ago, Bitcoin Dominance had reached 70%. However, at the beginning of 2017, the index started a long and robust downtrend, down to as low as 35%. During this time, altcoins like Ethereum and XRP had five-digit percentage returns. Other, smaller-cap altcoins performed even better.
Back then, retail investors seemed to be continually investing in altcoins without understanding what they were or used for. At that time, Bitcoin soared to $ 20,000, while Ethereum reached over $ 1,400, and XRP reached more than $ 3.50.
Since that bottom in BTC dominance was hit, however, altcoins have been in a steady downtrend that’s wiped out over 90% of their gains in most cases. While there are a few outliers in the market that perform regardless of Bitcoin, most suffer at the hands of Bitcoin.
Altcoin may soon get a large chunk of the dominance back, as the latest price action in BTC.D shows the strong rejection of previous support has become resistance. This support is now acting as a strong resistance, which is the bottom trend line on the bear flag for months.
The goal of forming a bear flag is measured by taking the flagpole and applying it to the breakout point. The goal of this structure will be about 59% domination.
Bitcoin Dominance (BTC.D) Weekly | Source: TradingView
Below, 58% on the BTC.D chart can result in a protracted altcoin season. An altcoin season is a period, like early 2017, when altcoins outperform Bitcoin. Altcoins account for the majority of their profits in these explosive movements. But they only occur when BTC.D is declining.
DeFi-related tokens have been caught within an intense bull market over the past several weeks
Returning to the old, usual story, ETH – the largest altcoin in the market – is considered a guide for the development of Altcoins. However, ETH is constrained by many factors, including DeFi. Although DeFi is very powerful, there is not enough incentive to help ETH price benefit significantly.
There is now a total of $1.7 billion locked within DeFi smart contracts. This is three times the number seen in March of this year | Source: DeFi Pulse
According to investor SpartanBlack, a prominent investor and former Goldman Sachs partner, there are three possible reasons why DeFi could never become the driving force of ETH prices.
That is not to say that $ETH is not a good investment, but it seems the drivers for $ETH are more related to ETH2.0 and EIP-1559 progress than direct correlation with DeFi.
So if you want DeFi exposure the perp or individual tokens are a better bet.
— SpartanBlack (@SpartanBlack_1) July 1, 2020
- First reason: Investors preferring direct exposure to the tokens
- Second reason: The introduction of alternative collaterals, making it non-essential to buy ETH to participate in DeFi lending
- Final reason: The uncertainty surrounding whether the looming Ethereum 2.0 transition will break its composability
That is not to say that ETH is not a good investment, but it seems the drivers for ETH are more related to ETH2.0 and EIP-1559 progress than the direct correlation with DeFi…
Read more:
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