GZ Daily — BTC Dominance and the Altseason, German Telecom Supports Polkadot
By: Ground Zero
Tags: Polkadot, Altseason, Btc Dominance, Dot, Crypto

Ground Zero Daily covers the most recent news from the crypto and blockchain space.

Bitcoin dominance falls under 40%. Are we in the altseason?

In our recent A Year in Review article, we wrote on how the long-anticipated altseason never arrived in 2021, leaving many investors hungry for more profit from altcoins. But things might change sooner than we anticipated, as the BTC dominance falls below 40% in the final week of the year.

BTC dominance falls under 40%. Image source: CryptoPotato

Key facts:

Bitcoin dominance is the ratio between the market capitalization of Bitcoin to the total market cap of the entire cryptocurrency market. [1]

Bitcoin dominance was at an all-time low of 36.7% in January 2018. [2]

Current Bitcoin dominance of 40% is the second-lowest dominance ever recorded for Bitcoin. [2]

When Bitcoin dominance increases, it means that the demand for BTC increases and that the demand for altcoins decreases. In order to acquire more BTC, users trade altcoins in exchange for BTC. This typically occurs when users look for less volatile and safer assets. Accordingly, the price of Bitcoin typically rises.

On the other hand, when BTC dominance decreases, it signals that the users are preparing to use the profits earned from BTC to buy altcoins. This typically occurs when users look for a riskier investment that could potentially yield a multi-fold return. In crypto slang, we call this the “altseason”.

Determining if we are currently in an altseason or not plays a huge role in investment strategies. But like with so many topics in crypto, people can’t seem to agree on whether we are in the altseason or not.

The folks at BlockchainCenter created an automation tool for determining whether we are currently in an altseason or not. Their method estimates that if 75% of the top 50 coins performed better than Bitcoin over the last 90 days we are in the altseason. [3]

Altcoin Season Index. Source: BlockchainCenter.net

According to their Index, we are currently not in the altseason, as only 43% of the top 50 coins are performing better than Bitcoin.

But some disagree, claiming that the altseason has been going on for the entire year:

#Altcoins: Mini thread here on ‘wen #Altseason’. Alt season has been going on for an entire year, you just haven’t noticed it. Here’s the #Bitcoin dominance chart- you can see alts have flourished since January 2021. $BTC $ETH pic.twitter.com/c2w1PjHrqV — Altcoin Sherpa (@AltcoinSherpa) December 23, 2021

One of the key factors in determining the near-future BTC dominance will be the inflow of institutional investors next year. It seems highly unlikely that institutional investors will make their first moves in the crypto world by investing in extremely volatile altcoins. It would be difficult to explain the investment in altcoins to the shareholders in the event of a new bear market and the probable collapse of the altcoin prices. It is more probable that the new institutional investors will probably make their first crypto investment in assets like BTC, ETH, and a couple of other time-tested coins. This would result in an influx of fresh capital and a surge in BTC dominance.

For now, the crypto community will have to wait and see what the future holds for the BTC price and Bitcoin’s dominance.

At the time of writing (29th December 2021, 13:09 UTC), BTC's dominance rebounds at around 40.2%.