Currently, bitcoin (BTC) dominance represents 60% of the cryptocurrency market, its highest level since 2021.
This is an important metric that indicates that investor money is going into bitcoin, to the detriment of the rest of the digital assets. In other words, it is a sign that the coin created by Satoshi Nakamoto has the majority of the total cryptocurrency market capitalization.
For NYDIGa financial services company with BTC, this not only reflects that there will not be an altseason in the short term, but also that “it says some things about the state of the market.”
On the website of Blockchain Centeran altseason occurs when 75% of the 50 largest-cap cryptocurrencies outperform BTC over 90 days.
The same site has an ‘altseason index’, a tool that indicates whether the market is going through an altcoin season. At the moment, only 29% of the cryptocurrencies with the largest capitalization performed better than BTC in the last 90 days so an altseason is not on the horizon.
In the following graph you can see that BTC dominance continues to grow since the 2021 altseason.
In this regard, the NYDIG firm points out in one of its latest reports that the growing dominance of BTC is due to the role of digital currency as a store of valuelack of real uses of “blockchain technology” from the rest of the cryptocurrencies and little institutional interest in ether (ETH), the digital currency of the Ethereum ecosystem.
Bitcoin as a store of value
In their publication, NYDIG analysts highlight that BTC’s role as “digital gold is attractive to traditional market investors, as expressed through exchange-traded funds (ETFs)” in the United States.
Since its launch in January 2024, The 12 funds have registered money inflows of more than 24,000 million dollars.
Likewise, it is important to note that NYDIG highlights the narrative of BTC as “digital gold.”
As CriptoNoticias has explained, bitcoin has characteristics that make it similar to the precious metal. First of all, the digital currency has a supply set at 21 million, which is a significant difference from fiat money, which is devalued due to inflation or the monetary policies of central banks.
In any case, it is worth noting that the perception of bitcoin as a safe haven asset is at an early stage in its adoption cycle. The digital currency is still vulnerable to the volatility generated by macroeconomic factors such as, for example, an interest rate cut in the United States or geopolitical tensions.
However, for many investors this represents an interesting opportunity to accumulate BTC at relatively low prices, thinking long term.
Ethereum does not arouse the same interest
NYDIG analysts, at the same time, highlight that the narrative of BTC as “digital gold” opposes ETH as “digital oil”. “It doesn’t seem to resonate as much with traditional investors, at least if the flows into ETFs are any indication,” they noted.
This comparison is because ETH is seen as a source of energy or fuel in the cryptocurrency ecosystemjust as oil is for many economic activities globally.
Ether is the fuel to run transactions, applications and smart contracts within the Ethereum network
However, this narrative did not carry over to ETH exchange-traded funds in the United States.
Since its launch in July 2024, These ETFs recorded money outflows of more than $500 million.
It is important to note that at the time of publication of this note, the price of ether is $2,790, a 42% below the all-time high set on November 16, 2021.
Another issue to take into account is the inflationary effect that caused the Dencun upgrade of the Ethereum network. With its emergence, temporary data storage was introduced in the second or L2 layers of Ethereum, where transaction commission fees are cheaper.
What happens is that if the demand moves to layer 2, the buying pressure for ETH is reduced since fewer users need that asset to pay gas rates.
If there is no corresponding increase in demand, it creates downward pressure on the price of the asset. It should be remembered that, unlike BTC, ether is not in limited supply.
In the 2017 bull cycle it happened because Ethereum facilitated a rise in altcoin dominance due to its ability to capture market attention. This was due to its role as a platform for decentralized applications (dApps) and as a fundraising venue for initial coin offerings (ICOs).
Instead, in 2020-2021, it was thanks to the boom in decentralized finance (DeFi), non-fungible tokens (NFT) and emerging competitors to the Ethereum network took center stage in the attention of altcoins. In this regard, specialists add NYDIG:
“There doesn’t seem to be (yet) one or two things that have captured the industry’s collective attention like they did in 2017 and 2021.”
Report from NYDIG, a company specialized in trading.
Lack of uses of “blockchain technology”
Finally, NYDIG believes that another reason behind BTC’s rise in dominance is the lack of compelling new use cases “for blockchain-based technology.”
Before continuing, it is worth explaining that there is no such “blockchain technology”, as explained in Criptopedia (educational section of CriptoNoticias). A blockchain, or chain of blocks, in Spanish, fulfills the function of recording transactions or messages within the network.
Blockchain is often used as a substitute for the term Bitcoin or Ethereum technology. However, It is only an essential part of these networks, but does not replace them.
The so-called “blockchain technology” had a lot of impact years ago, at least in the media. It was promoted as being useful for supply chain traceability, auditability of public documents, information storage, identity verification, etc. But, the market never largely opted for these uses of decentralized networks.
