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Where is Bitcoin Market Dominance Headed?

As of March 1, 2022, $BTC continues its upward trend away from local bottoms at $33k and $34.3k.

4-Hour Stoch RSI shows it’s oversold, so I’m still expecting a fairly large retracement – unless external forces change market sentiment.

But even with Bitcoin almost reaching its local high near $46k, altcoins are lagging way behind. Blue chip projects like Chainlink ($LINK) and Polkadot ($DOT) are struggling to keep up with Bitcoin’s performance. Many altcoins have even made lower-lows following Bitcoin’s $33k support test back in January.

Chainlink is nowhere near its local high at $23.22

Bitcoin’s market dominance remains above 43%, indicating that a plurality (not majority) of crypto holders are hedging their bets on Bitcoin while other projects lag behind. Bitcoin market dominance is a byproduct of 2 beliefs held by society:

  1. Bitcoin = All Crypto
  2. Bitcoin is the safest crypto

Bitcoin maxis take it a step further and understand the fundamentals and technology behind the blockchain to justify their “all in” approach to 1 Bitcoin = 1 Bitcoin, but for retailers who barely know to read charts, let alone do research on the products they’re investing in, Bitcoin is their safest bet. It’s less volatile than most other altcoins or they’re too uneducated to see beyond the BTC/ETH options Venmo offers them. Name recognition plays a massive role as well. Bitcoin was the first. Bitcoin rolls off the tongue better than “Ethereum” (which to the layman sounds more like an exotic European hard liquor than a massive blockchain technology operating most tokens in crypto).

Bitcoin is great for P2P value transfer, but blockchain technology is and can be so much more than just a transfer of funds. It’s a knowledge graph – an ecosystem of anonymous and decentralized data that’s verifiable by math. In simpler terms, if Bitcoin market dominance went down and retailers and investors threw more of their fiat into good altcoin projects, blockchain technology would evolve much faster than it is right now. There is a net benefit to society if these smaller altcoin projects (like XYO, for instance) got a bigger slice of the pie.

What does their coin do that’s better or different than Bitcoin? If they can’t answer that question, then Bitcoin deserves all the value it gets.

It’s important to note that I’m not advocating for some kind of “redistribution” of wealth. Instead, I think altcoin devs need to do a better job of advertising their brand and their coin to welcome new and larger investors to their projects. Devs need to explain – in layman’s terms – why people should dump fiat in their coin versus Bitcoin. What does their coin do that’s better or different than Bitcoin? If they can’t answer that question, then Bitcoin deserves all the value it gets.

But perhaps that’s the point. Crypto is essentially the wild west of investing. There are no rules here. It’s about as free as a market gets. Whether or not the reason why Bitcoin market dominance is so high might be irrelevant – instead it’s a function of reality.

Bitcoin crypto market dominance has been on the decline since 2016, but 43% is still absurdly high given the number of (good) cryptocurrencies out there in the market. This is good and bad.

The Good: If total crypto market cap goes up and Bitcoin market dominance goes down, altcoins are going to have a field day.

The Bad: If Bitcoin market dominance goes down and total crypto market cap dips in kind, altcoins are sure to get dragged down along with Bitcoin.

The moral of this story is this.

Traders and retailers should educate themselves as much as possible before investing into a coin and shouldn’t blindly dive into Bitcoin “just because”. For seasoned investors, consider making the pie larger by diversifying your portfolio and unlinking altcoin trades from Bitcoin price action on your trading bots. Everyone benefits especially investors.

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