Bitcoin Dominance Peaked: What Does It Mean for Altcoin Season?

Bitcoin's share in the cryptocurrency market has reached its highest level in the past four years, reflecting a shift towards security among investors. The world's largest cryptocurrency currently constitutes more than 60% of the $2.9 trillion digital asset market, representing the highest BTC dominance since February 2021.

Market analysts attribute the increasing dominance of Bitcoin to a broader sense of escape from risk in the crypto sector. Mike Cahill, Director of the Pyth Data Association, said that the increase in Bitcoin dominance indicates a cautious environment where investors prefer the relative stability of Bitcoin over speculative assets.

Cahill said, “When liquidity concentrates in Bitcoin, it is generally a sign of a cautious market expecting stronger conviction in riskier assets.”

This trend indicates that widespread expectations of a "altcoin season" similar to the rally at the end of 2021 may not materialize. During that period, while Bitcoin's dominance decreased, almost all cryptocurrencies had significant gains. However, in the current market, only a specific group of altcoins has a high correlation with Bitcoin, which means a more selective altcoin rally.

During the "DeFi summer" period between the middle of 2021 and the end of 2022, investors flocked to decentralized finance (DeFi) projects, causing Bitcoin's market share to drop to as low as 40%. However, in 2022, the collapse of key tokens like Terra (LUNA), which wiped out 40 billion dollars from the market, marked the beginning of a downward trend for speculative assets.

Casa's CTO Jameson Lopp said, "Many people have been harmed and disappointed by altcoins." He stated that many investors now see the crypto market as "a big risk," and either completely exit or switch to Bitcoin.

One of the most important factors behind the increasing dominance of Bitcoin is institutional adoption. Since the launch of Bitcoin exchange-traded funds (ETFs) on Wall Street in January 2024, institutional investors have been increasing their exposure to Bitcoin through sophisticated risk and arbitrage strategies.

Amberdata Derivatives Director Greg Magadini said, “Bitcoin is trading in a macro context compared to other cryptocurrencies.”