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The cessation of the rise in bitcoin's (BTC) dominance rate, which represents the cryptocurrency's portion of the market, suggests that alternative tokens (altcoins) may outperform it in the near future.
According to TradingView data, the dominance rate increased from 42% to 48% in the first quarter, but has encountered difficulty exceeding this level thus far this month.
For nearly two years, the metric has fluctuated between 38% and 48%, and during periods where it declined from 46% to 48%, altcoins experienced significant gains.
"Bitcoin’s dominance could peak out, this would signal that altcoins would outperform," Markus Thielen, head of research and strategy at crypto services provider Matrixport, said in a note to clients on Thursday.
According to the chart, the total market capitalization of altcoins (represented by the white line and blue arrows) experienced a significant increase of over 60%, reaching $1.39 trillion within a span of two months after the BTC dominance rate fell below 48% in July 2021. This trend was observed in other instances when the BTC dominance rate took a bearish turn, such as in mid-October 2021 and June 2022, leading to an upward trend in the value of altcoins.
History could repeat itself, according to Thielen.
"Bitcoin’s dominance appears to be peaking out at similar levels as in 2022 – accounting for 45/46% of the total crypto market capitalization," Thielen said. "For bitcoin to continue outperforming the rest of the ecosystem would imply that only bitcoin matters, which appears to be unlikely considering the intellectual and financial firepower that is being deployed on other chains."
"Bitcoin benefited from U.S. liquidity but going forward, this could change," he said.
Source Coindesk
