FX.co ★ Bitcoin dominance hits a three-year low: is it worth waiting for altcoin season?

The cryptocurrency market has made a big leap forward in 2021. Bitcoin, as usual, received the main laurels, becoming the most profitable financial instrument of the year. But there is a feeling that the main cryptocurrency is gradually losing ground. This is reflected in the decline in the BTC dominance index in the market, which at the end of 2021 dropped to record values. Usually, a drop in the share of Bitcoin is accompanied by an increase in the altcoin market,but it looks like there is no need to expect an altcoin season anytime soon.

Let's dive into the statistics showing the downward dynamics of the dominance of the main cryptocurrency on the market. As of January 5, the share of bitcoin dropped to the minimum of 2021. In January last year, the percentage of BTC's presence on the market reached 73%, and currently it is about 40%. On average, over the year, the share of Bitcoin in the cryptocurrency market fell by 30% and continues to decline.

Usually, a drop in the BTC dominance index to the 40 mark signals the beginning of the altcoin season. But as of January 5, the rest of the market is also in the correction stage. The main reason for this was the fall in BTC quotes and the subsequent sale, which caused fear to reign in the market. If the level of bitcoin dominance continues to fall or remains around 40, then by mid-January, we can expect an increase in the capitalization of the altcoin market. I attribute this to the gradual recovery of altcoin quotes from the top ten over key support areas.

It cannot be ignored that the share of bitcoin's dominance is declining due to a change in the global trend in the cryptocurrency market. The new generation of digital assets is guided by the principle "the value of the ecosystem determines the value of quotes," and not vice versa. Bitcoin is clearly losing out to new cryptocurrencies in terms of functionality, and therefore its share of dominance will continue to decline.

The historical record of the share of Ethereum in 2021 at around 22.35% is only part of the puzzle, and this trend will continue to develop. At the beginning of 2022, the key moment that can stop the decline of BTC's share in the market may be the approval of a spot ETF, which will trigger a cascade of institutional investments.

On the horizontal charts of Bitcoin, the situation is the same: the asset is consolidating above the support zone of $ 46.3k–$ 46.8k, while simultaneously gravitating towards the lower border of the area due to a slight preponderance of sellers. There are still no strong buyers on the market, but institutional investors have resumed the formation of new positions, and therefore local bursts of growth can be expected.

From a wide perspective, everything looks hazy, but a slight silhouette of bears is visible. This is due to the first increase in the number of BTC coins on crypto exchanges since mid-2021. The main stage of profit-taking was completed at the end of December, and therefore the transfer of coins to crypto platforms can be regarded as a local sale.

It's hard not to compare the current situation with the price movement in May 2021. After a false breakout of the key resistance zone, the price continued to move in a narrow range with a parallel shift to the lower border of the area. We are seeing a similar scenario now. Therefore, I assume the price will drop to the $42k–$45k area, where the asset will collect liquidity and start a full-fledged upward movement to $50k.