3 reasons why Bitcoin is regaining its crypto market dominance

Bitcoin (BTC) is regaining its mislaid crypto marketplace dominance adjacent arsenic it trades astir 60% beneath its grounds highs.

Bitcoin dominance astatine 6-month highs

The Bitcoin Market Dominance (BTC.D) index, a metric that weighs BTC's marketplace capitalization against the remainder of the cryptocurrency market, jumped to astir 47% connected May 27, its highest since October 2021.

Bitcoin Market Dominance regular chart. Source: TradingView

The dominance scale swelled contempt the driblet successful Bitcoin's marketplace headdress successful the past six months from $1.3 trillion successful November 2021 to astir $550 cardinal successful May 2022, suggesting that traders were much comfy selling altcoins. 

Let's look astatine 3 apt reasons wherefore traders person been rotating retired of the altcoin marketplace to question information successful Bitcoin.

Ethereum "Merge" communicative is cooling down

Ethereum's autochthonal token Ether (ETH), the largest alternate cryptocurrency by marketplace cap, has witnessed accordant declines successful its marketplace dominance successful the past 5 months—from 22.38% successful December 2021 to 17.86% successful May 2022.

Ethereum Market Dominance regular chart. Source: TradingView

The plunge comes aft 2 years of a sustained uptrend, with ETH/BTC rising much than 200% betwixt September 2019 and December 2021.

As Cointelegraph reported, Ether outperformed Bitcoin successful caller years, mostly owed to the hype surrounding its long-awaited protocol upgrade, called "the Merge," which hopes to marque Ethereum much scalable and little expensive.

But the upgrade, which aims to modulation Ethereum's blockchain from proof-of-work to proof-of-stake—a counterpart known arsenic Beacon Chain, has faced repeated delays successful its launch.

Only recently, Martin Köppelmann, the co-founder of the Ethereum Virtual Machine- (EVM)-compatible Gnosis chain, highlighted a seven-block reorganization connected the Beacon Chain, meaning that the concatenation got concisely "forked" successful its investigating phase.

The Ethereum beacon concatenation experienced a 7-block heavy reorg ~2.5h ago. This shows that the existent attestation strategy of nodes should beryllium reconsidered to hopefully effect successful a much unchangeable chain! (proposals already exist) pic.twitter.com/BkQrKuUlw1

— Martin Köppelmann (@koeppelmann) May 25, 2022

Ether dropped by astir 13.5% against the U.S. dollar pursuing the uncover connected May 25 portion ETH/BTC plunged to 0.059, the lowest successful six months. 

ETH/BTC regular terms illustration featuring cardinal enactment level. Source: TradingView

Ethereum lacks narratives to thrust ETH's terms upward aft undergoing the Merge upgrade, noted OxHamZ, an autarkic marketplace analyst, saying that investors person already "priced in" the web upgrade hype. 

— 0xHamZ (@0xHamz) May 25, 2022

LUNA to zero

Bitcoin's renewed crypto marketplace spot besides appears owed to the Terra (LUNA) market's collapse.

LUNA/BTC, a fiscal instrumentality that traces the Terra token's spot against Bitcoin, fell by 99.99% to 0.00000004 successful May, which made it practically worthless.

Meanwhile, LUNA declined similarly against the dollar, raising anticipations that traders dumped the token to question information successful BTC and cash.

LUNA/BTC regular terms chart. Source: TradingView

LUNA's marketplace headdress earlier the May's deadly clang was $40.88 billion.

Related: Crypto funds nether absorption driblet to a debased not seen since July 2021

Altszn ded 

On the whole, the altcoin market, containing everything from large-cap blockchain projects to sketchy crypto assets, has fallen by astir 65% six months aft topping retired adjacent $1.7 trillion.

Altcoin marketplace headdress regular chart. Source: TradingView

A deeper look into immoderate tokens shows that — dissimilar Bitcoin — astir are down implicit 80% from their all-time highs, hinting astatine an wide capitalist exit from altcoins and into cash, stablecoins oregon BTC.

DeFi projects and their downside retracement from grounds highs. Source: Messari

Some dormant crypto projects truthful acold successful 2022. Source: Messari

That is chiefly due to the fact that Bitcoin isn't lone the oldest blockchain, but stands connected its ain without immoderate cardinal authority.

No 1 controls the #bitcoin network.

— CZ Binance (@cz_binance) May 26, 2022

Historically, Bitcoin's dominance drops during crypto bull markets arsenic waves of caller tokens outpouring up during the mania phase.

For instance, the duration of the infamous initial coin offering (ICO) pump coincided with BTC.D dropping from astir 96% successful January 2017 to 35% successful January 2018.

BTC.D regular terms chart. Source: TradingView

Then the March 2020 clang was the opening of the DeFi and nonfungible token (NFT) hype, boosted further by the Federal Reserve's quantitative easing. 

Therefore, if Bitcoin's marketplace dominance has so bottomed out, it could erstwhile again align with a macro bottom successful Bitcoin price, and perchance the opening of a caller bull marketplace signifier successful the coming months.

The views and opinions expressed present are solely those of the writer and bash not needfully bespeak the views of Cointelegraph.com. Every concern and trading determination involves risk, you should behaviour your ain probe erstwhile making a decision.