Bitcoin [BTC] dominance is on the rise, again. Leading altcoin projects are presenting higher risks after the rise of Bitcoin maximal-ism and the growth of stablecoins and other developments around distributed ledger and blockchain.
Technically, it has broken above levels in June and August 2019, which began a rise of dominance from nearly 50% to a high at 70%. In 2018, the bull and bears in the crypto markets faily coordinated in their trends. Nevertheless, lately, the correlation has been stronger during bull trends, while altcoins have lost higher value in bear markets.
Notice, how the 2018 bear market and accumulation in early 2019, saw a rise of Bitcoin maximal-ism. The bear market in 2018 brought on an existential crisis in the markets with large-scale market manipulation, miner capitulation, and general uncertainty around the feasibility of leading cryptocurrencies like Bitcoin and Ethereum to scale to world applications.
The revolution that blockchain and cryptocurrencies present are largely analogous with the internet revolution in the 1990s and early 2000s. The dot-com bubble in value is consistent with the cryptocurrency ICO bubble as well. Despite tremendous loss in value after the bubble, some projects like Amazon continued to become the top companies in the world. Moreover, the transformation and innovation in the space led to the development of a variety of internet based services like Facebook, Netflix, and Google which have become the pillars of the modern day world.
Blockchain, along with cryptocurrencies, presents an opportunity to add greater accountability and transparency in the processes. Moreover, it aims to revolutionize the global transfer of information to include seamless transfer of value across countries as well. Hence, improving global trade and remittances. The people in the space are looking to develop and invest in these early gems which could possibly become giant networks in the future.
As billionaire investor and venture capitalist, Michael Novogratz puts it,
“All other cryptos are venture bets and will only have lasting value if they become a product that is useful.“
Distribution of Value in the Crypto-Markets
The distribution of value in the crypto markets is fairly uneven. The percentage of top 10 crypto (excluding USDT) accounts for more than 87% of the distribution; BTC accounts for 66.8% dominance at press time.
Presently, the total market capitalization of stablecoins is $9.58 billion, which is around 4% of the total market capitalization of the cryptocurrency markets. Individually, this figure is greater than 99.94% of the 5400+ cryptocurrencies listed on CoinMarketCap. Moreover, it has reached parity with XRP, while Bitcoin [BTC] and Ethereum [ETH] are the only two cryptocurrencies with a greater MCap than USD backed stablecoins.
The rest account for less than 10% of the total market cap. While Bitcoin’s value is driven as an economic fuel backed by electrical energy, many cryptocurrency projects are relying on Lindy Effect and network growth. According to the Lindy Effect, the longer the technology and it’s value thrives, the stronger is the probability of its future existence. Moreover, combining with the laws of network growth, there is a lot of potential application of these projects in the FinTech Industry.
However, there are still hundreds, if not thousand, popular projects with “overly” zealous innovators and investors. The ICO bubble put an end to those high expectations, and the project developers and marketers are now undergoing a massive bear market. More than 4000 projects listed have gone under liquidity crisis, with larger projects reeling under the economic pressures as well.
Chart and Trend Analysis
The dominance of Bitcoin is back above the 50 and 200-Day EMA (Exponential Moving Average), with the golden cross among the two moving averages at the horizon. Prominent trader, Ugly OldGoat, tweeted the possibility of continuation in trend based on TD sequential analysis, he observed,
Very significant weekly Green 2 over green 1 on Bitcoin Dominance. Do not be surprised if the halving only helps BTC. If so, this will be the wake-up call for The Crypto World. Bitcoin is The Standard. Bitcoin alone is innovation. Bitcoin is sound money.
“The markets can stay irrational longer than you can stay solvent” – John Maynard Keynes
The attention towards the cryptocurrency markets began towards the later half of 2014 with the growth of Ethereum mining and prospects of growth around XRP. It wasn’t until the second half of 2019 when the markets started uptrend in its values. Beginning with less than 100 cryptocurrencies and a total market capitalization of about $45 million, the market rose to over 5000 tokens with the peak capitalization of $457 billion (a staggering 10,00000% rise).
Currently, the total market capitalization of altcoins (excluding Bitcoin) is $80 billion. Nevertheless, the entire market is still recouping for a large bubble. At the height of the bubble, the market capitalization of a cryptocurrency like Tron [TRX] and Ethereum [ETH] was about $15 billion and $140, respectively, while that of Tesla, Inc. was about $53.5 billion.
Will Bitcoin Halving Bring Back Alt-Season?
Currently, the altcoins are forming one large descending triangle with the base around $36 billion. A break-out to the upside at the moment could resume the linear rise which began after the 2nd Bitcoin [BTC] halving in 2016. Bitcoin [BTC] halving is due in the first week of May 2020, post which it will become a much scarier asset to mine and possibly acquire. This makes the hunt for Bitcoins harder, and investors and innovators could possibly look for prospects elsewhere.
However, if the price continues to break back below the generational bearish trend, we could see a retest of support from the base of the triangle.
The total market capitalization of cryptocurrency markets (including Bitcoin) is also forming a 40-month pivotal pattern which is nearing its breakout point. Prominent analyst, Murad Mahmudov, tweeted on the significance of the pattern and the horizontal line at $234 billion, he notes,
There seems to be a generational pivot precisely at the intersection of the two most important diagonals on the entire chart dating back to the ATH
Could BTC be coiling in preparation for something huge?
An alt-season could ensue in the near future. However, the strong dominance and dependence on the liquidity of Bitcoin makes a bull market in Bitcoin imperative for a rise. The value usually flows from Bitcoin to large cap altcoins and then to medium and small cap tokens. In an opposing trend, the value gets taken away from small and medium scale projects before the rest of the market.
The COVID-19 hit economy is causing wide-scale unemployment and raising debts all over the world. Recession is upon the global economy and the world is just starting to witness a gradual return to businesses and activities after severe lock-downs and containment efforts. Economists argue over the possibility of quick V-shaped recovery as it happened in six of the last seven recessions. However, if economic adversities and drastic social change continue to affect society, we could experience a U-shaped curve which stays at the bottom for long and causes paradigm shifts which could possibly reshape the world.
Due to the strong correlation of Bitcoin with the stock market, it is reasonable to account for the movements in stock markets and safe-haven assets like gold to analyse the characteristics and risk around the cryptocurrency markets, as well.
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