Bitcoin dominance is a good metric for determining where we stand in the larger crypto market. You must be thinking, what percent is included in the total cryptocurrency market? Bitcoin was the only cryptocurrency accessible when it was introduced moreover a generation ago; therefore, it had complete market dominance. The cryptocurrencies like Ethereum and Cardano began to erode Bitcoin’s supremacy.
Until 2017, Bitcoin represented almost ninety percent of global crypto market capitalization, but it changed abruptly in early 2017. The price value of Bitcoin dropped to fifty percent by September. Bitcoin has regained its supremacy in the late 2017s. It gained seventy percent of the total market value. Similarly altcoin prices also increases with it.
How did it mean for cryptocurrency money flows?
Cryptocurrencies are new in the market, and the crypto cycle follows a predictable structure of money movements. The movement of money flows is in the simplest form, from less risk to more. In other words, we can say that from fiat currency to small altcoins. Please note that altcoins are any cryptocurrency that is not Bitcoin. It all begins with investors purchasing Bitcoin with fiat money. As the value of Bitcoin rises, more people believe cryptocurrencies are a worthwhile option and would like to participate. Several traders prefer to invest in the crypto world with the help of Bitcoin because it is the safest option. As Bitcoin’s price rises, it leaves the altcoin prices in the dust as altcoin mining is much easier.
So now, many traders have started to invest their Bitcoin earnings into other cryptocurrencies like altcoins like Ethereum because the prices of Bitcoin have started to flow down. When people switch, we observe an influx of cash into these cryptocurrencies, which causes the price to grow. When money is transferred into Bitcoin instead of altcoins; as a result, the value of Bitcoin rises faster. This is how bitcoin’s dominance grows. But when investments leave bitcoin and migrate towards alternatives, bitcoin’s supremacy falls. At the moment, bitcoin is rising in value, whereas altcoin prices are stagnant or falling in value. This appears to be the beginning of a traditional flow of funds cycle.
Why is bitcoin gaining value in comparison to other cryptocurrencies right now?
There are several causes for this. The announcement from the United States that a Bitcoin future ETF could be authorized in the next several months is one of the significant determinants of price. This will allow the US people to obtain accessibility to a new environment that is free of concerns and provides privacy. Investors have waited for a long time just to get a regulated means for investing in Bitcoin. Even one to five percent investment will also affect greatly on overall investment returns.
Furthermore, considering that Bitcoin’s data was quite optimistic before the China crackdown announcement, the value flows down dramatically. Concerns about excessive inflation in the United States are also likely to be a major factor driving Bitcoin's price increase. The latest splitting took place in May 2020, and it has been a big element in the Bitcoin market.