Bitcoin dominance of crypto hits four-year high. Here’s what it means for prices – BitRss

In rocky markets, spooked investors tend to flock to the safety of gold. In rocky crypto markets, they flock to the crypto version of a haven: Bitcoin.

Those moves have made Bitcoin dominant over the total cryptocurrency market — the top crypto now takes up more than 60% of the $2.9 trillion industry.

That’s the highest since February 2021. Bitcoin’s total market value sits at $1.9 trillion.

“Rising Bitcoin dominance typically signals a risk-off environment, where investors prioritise Bitcoin’s relative stability over more speculative assets,” Mike Cahill, Director of Pyth Data Association told DL News.

“When liquidity is concentrated in Bitcoin, it’s often a sign of a cautious market awaiting stronger conviction in riskier assets.”

This suggests that investors still hopeful of a repeat of late 2021 — or the market euphoria of DeFi summer — will be left behind.

In 2021, nearly every token rallied in what was later dubbed “altseason,” while Bitcoin’s dominance plummeted.

Nowadays, only a few altcoins have a high correlation with Bitcoin, meaning the top crypto and a small subset of alternative tokens will be the big winners.

“Selective altseason is here,” said Ki Young Ju, founder and CEO of CryptoQuant, said on X on February 8. “Infra coins like Ethereum are sluggish, while those tied to institutional adoption, stablecoins, and memes have survived.”

Even so, “the era of ‘everything pumping’ is over,” Yu said.

Bitcoin’s foothold

During DeFi summer, which took place between mid 2021 and late 2022, Bitcoin’s foothold over the total industry fell to a low of 40%.

Users piled into decentralised finance, while Bitcoin took a back seat.

But the good times would come to an end. The first warning came in 2022 with the Terra Luna collapse, which saw $40 billion wiped from the crypto ecosystem.

Later in the year, Sam Bankman-Fried and the FTX ($0.00) scandal cast a dark cloud over the industry. And in 2023, the fall of Silvergate and Silicon Valley Bank deepened crypto’s crater.

Disillusionment

The deluge of scandals made investors rush for the exits to safer areas of the market.

“A lot of people have been burned by and became disillusioned with altcoins,” Jameson Lopp, CTO of crypto custodian Casa, told DL News. “More people are viewing crypto as a massive casino, and either quit the space completely or switched to Bitcoin.”

John Haar, managing director at Bitcoin financial services firm Swan Bitcoin, echoed that view.

“Crypto, which we separate from Bitcoin, has struggled to form a new narrative to sell itself,” Haar told DL News.

That’s because in 2022, many crypto projects “were revealed to be pushing promises of fake innovation, and instead were shown to be a mix of hype, speculation, flawed designs, and outright fraud,” Haar said.

Even so, Lopp signalled that memecoins are actually good for Bitcoin, even as the once-darling sector of crypto has fallen out of favour.

“The proliferation of memecoins and acceleration of altcoin cycles to compress them into a half life of hours is bad for altcoin season and good for Bitcoin,” he said on X on Monday.

Institutional adoption

Some analysts say that institutional adoption is another of the top drivers for soaring Bitcoin dominance.

Since Bitcoin exchange-traded funds went live on Wall Street in early January 2024, institutions have been devouring Bitcoin as part of sophisticated risk and arbitrage trades.

“Bitcoin has been trading on a macro picture,” compared with other cryptocurrencies, Greg Magadini, director of derivatives at research firm Amberdata told DL News.

Turning tides

That said, the tides might be turning.

Other cryptocurrencies have been gaining ground. Ethereum has its own ETF and a new, friendlier Securities and Exchange Commission under US President Donald Trump has received an onslaught of new ETF applications.

Litecoin has the highest odds of approval, followed by Solana, and XRP ($2.14).

JPMorgan sees up to $8 billion flowing into an XRP ETF, with experts saying it could receive $800 million in its first weekend of trading.

Pedro Solimano is a markets correspondent based in Buenos Aires. Got a tip? Email him at [email protected]. creator solana token