Specialists are focusing on current market trends that have contributed to the increase in the dominant index of the first cryptocurrency. For the first time in two years, Bitcoin occupies over half of the market value of all cryptocurrencies with a total crypto market capitalization of $1.07 trillion.
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Bitcoin Pricing Principle
As of June 20th, the share of Bitcoin (BTC) slightly exceeded 50% and is currently maintained at that level. Typically, Bitcoin's share in the market increases during cyclic downturns in the industry and decreases during bullish periods when investors shift to other coins.
In the early days of the cryptocurrency market, Bitcoin occupied a large portion of the market, but in 2018, its dominant index fell to 34% before starting to rise again. In 2022, the crypto market experienced a crash due to several bankruptcies of major players, including the FTX exchange in November. At that time, Bitcoin's share was 38%.
The increase in Bitcoin's dominant index in the market is not a clear sign of anything specific but rather reflects the current market situation. This happens approximately every 4 years before Bitcoin halving and continues for another six months to a year after it. The current growth in the index indicates that long-term investors prefer to invest in Bitcoin, partially withdrawing funds from altcoins and partially using the capital influx mainly to purchase BTC.
Capital Reallocation within the Market
There are no real fundamental reasons for such capital reallocation within the market. Here, the "herd effect" and self-fulfilling prophecy are at work - if everyone believes in Bitcoin's growth due to the halving, they behave accordingly, leading to an increase in its price. Even short-term traders reinforce the current trend, acting as "positive feedback."
Thus, one can note an influx of capital into the two leading cryptocurrencies.
| Cryptocurrency | Market Capitalization Index |
|---|---|
| Bitcoin (BTC) | 50% |
| Ethereum (ETH) | 20% |
The dominant index of the second-largest cryptocurrency by market capitalization, Ethereum (ETH), remains stable. The growing interest of investors in Bitcoin may indicate their increased caution towards other cryptocurrencies. In early June, the U.S. Securities and Exchange Commission (SEC) designated several cryptocurrencies as unregistered securities in their lawsuits against the Binance and Coinbase crypto exchanges. This decision led to the sell-off of these assets by market participants. Bitcoin is considered a commodity by U.S. regulators, which helped it avoid as significant of a price drop as experienced by altcoins recognized as securities.
Such actions have led to certain consequences:
- a sharp outflow of capital from altcoins;
- a decrease in the prices of altcoins;
- a shift in the balance between Bitcoin and altcoins.
According to Nekrasov, as long as the "SEC and altcoin story is not over," the capital flow from altcoins to Bitcoin will only strengthen, and one can expect this trend to continue - Bitcoin's dominant index may reach 55%.
If we exclude the largest stablecoins (cryptocurrencies whose value is pegged to the U.S. dollar), where capital is also typically shifted from other cryptocurrencies, Bitcoin's dominant index already exceeds the expert's forecast and stands at around 57%.
The analyst emphasizes that it is more important to look at the trend rather than specific figures. The trend of the dominant index can be used as an indirect indicator to determine the stage of market growth: typically, it involves the cycle of Bitcoin's growth, altcoin growth, "junk" asset growth, a sharp decline in the entire market, and so on. If Bitcoin's dominance is increasing, one can assume that a new wave of positive trends in the market has begun, although a confident assertion would require considering a range of other indicators.
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