Bitcoin (BTC) is regaining its lost cryptocurrency market dominance, even as it trades almost 60% below its record highs.
Bitcoin dominance for 6 months maximum
The Bitcoin Market Dominance (BTC.D) index, a measure that weighs the market value of BTC against the rest of the cryptocurrency market, rose to about 47% on May 27, the highest since October 2021.
The dominance index increased despite a decline in the market value of Bitcoin over the last six months from $ 1.3 trillion in November 2021 to almost $ 550 billion in May 2022, indicating that traders were more confident selling altcoin.
Let’s look at three probable reasons why traders have turned away from the altcoin market to seek security in Bitcoin.
Ethereum’s Merge’s story is cooling down
The native Ether (ETH) symbol, the largest cryptocurrency by market value, has witnessed steady declines in its market dominance over the past five months – from 22.38% in December 2021 to 17.86% in May 2022.
The blow comes after a two-year sustained upswing, with ETH / BTC rising by more than 200% between September 2019 and December 2021.
As the Cointelegraph reported, Ether has outperformed Bitcoin in recent years, mainly due to the hype surrounding a long-awaited protocol update, called the “merger”, which hopes to make Ethereum more scalable and cheaper.
But the update, which aims to change the blockchain Ethereum from proof of work to proof of object – a parallel known as Beacon Chain – has faced repeated delays in launching it.
Only recently did Martin Köppelmann, co-founder of the Ethereum Virtual Machine (EVM) -coordinated Gnosis chain, point to a seven-block restructuring of Beacon Chain, which means the chain “gave” in the short term.“At the testing stage.
The Ethereum beacon chain experienced a 7-block deep restructuring for ~ 2.5 hours. This shows that the current certification policy of nodes should be reviewed in order to hopefully result in a stable chain! (Suggestions already exist) image.twitter.com/BkQrKuUlw1
– Martin Köppelmann (@koeppelmann) May 25, 2022
Ether fell by almost 13.5% against the US dollar following the revelation on May 25, while ETH / BTC fell to 0.059, the lowest in six months.
Ethereum lacks reports to drive up ETH prices after undergoing the merger update, said OxHamZ, an independent market analyst, and said investors have already “priced” the online update.
What is the story of owning ETH after the merger?
All KPIs are down
Active wallet stagnant
NFT hype dautt
LP’s business volume is developing poorly
Liquidity is shrinking in stables
L2 man-eating increasing (h / t @TaschaLabs)
ETH has decreased by 50% but the value of the block space has also decreased
– 0xHamZ (@ 0xHamz) May 25, 2022
LUNA to zero
Bitcoin’s renewed cryptocurrency strength also appears due to the collapse of the Terra (LUNA) market.
LUNA / BTC, a financial instrument that drives the strength of the Terra symbol against Bitcoin, fell by 99.99% to 0.00000004 in May, making it virtually worthless.
At the same time, the LUNA depreciated similarly against the dollar, raising expectations that traders had dropped the symbol in search of security in BTC and cash.
LUNA’s market value before the fatal collapse in May was USD 40.88 billion.
Related: Board cryptocurrencies fall to a minimum not seen since July 2021
Overall, the altcoin market, which includes everything from large blockchain projects to bizarre cryptocurrencies, has fallen by almost 65% six months after reaching nearly $ 1.7 trillion.
A closer look at some symbols shows that – unlike Bitcoin – most are down more than 80% from their all-time highs, indicating that investors are generally moving from altcoins to cash, stablecoins or BTC.
This is primarily because Bitcoin is not only the oldest blockchain, but it stands on its own without any central authority.
No one controls #bitcoin net.
– CZ Binance (@cz_binance) May 26, 2022
Historically, Bitcoin’s dominance in cryptocurrency markets is declining as waves of new tokens spring up at the manic stage.
For example, the duration of the infamous initial coin offering (ICO) of the pump coincided with BTC.D, going from almost 96% in January 2017 to 35% in January 2018.
The collapse in March 2020 was the beginning of the DeFi and nonfungible token (NFT) hype, which was further exacerbated by the Central Bank’s quantitative easing.
Therefore, if Bitcoin’s market dominance has indeed bottomed out, it could again be in line with a the macroeconomic bottom in Bitcoin prices, and the possible start of a new bull market phase in the coming months.
The views and opinions expressed herein are those of the authors only and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading business involves risk, you should conduct your own research when making a decision.
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