The dominance of Bitcoin over altcoins increases amid market uncertainty
With Bitcoin strengthening its position in the market, altcoins are struggling to attract demand.
Key Takeaways
- Bitcoin’s dominance by volume has reached its highest point since the last time prices approached all-time highs.
- Ethereum ETFs have struggled to attract institutional demand since their launch in late July.
According to a recent report from Kaiko, Bitcoin’s (BTC) dominance over the top fifty altcoins by market capitalization has now reached its highest level since the last time prices peaked in March.
During the sell-off on August 5, linked to a sudden interest rate hike in Japan, Bitcoin’s cumulative volume delta (CVD) remained significantly positive on U.S. exchanges, while major altcoins experienced widespread selling. This trend highlights Bitcoin’s status as a “safe haven” in times of uncertainty.
Additionally, the launch of Bitcoin exchange-traded funds (ETFs) in the U.S. has bolstered Bitcoin’s status as an investable asset, while altcoins continue to face higher risk premiums.
The current atmosphere of global risk and a lack of cryptocurrency narratives, combined with differing central bank policies, contributes to a challenging macro environment.
Altcoins Underperform in Q3 In the third quarter, high-value altcoins, including Ethereum (ETH), have underperformed compared to Bitcoin. Ethereum’s price has consistently lagged behind BTC since the merger, and the launch of spot Ethereum ETFs in the U.S. has not reversed this trend.
Moreover, most altcoins remained significantly below their all-time highs in the first quarter despite more favorable market conditions.
Notably, open interest in perpetual futures markets for altcoins has declined, indicating a drop in demand. For example, the report notes that Solana’s (SOL) open interest on Binance has decreased from over $1.2 billion in March to less than $680 million currently.
Bitcoin Dominance Shown in ETF Flows Bitcoin’s dominance is also highlighted by ETF flows, as Ethereum ETFs have struggled to attract institutional demand since their launch in late July.
Grayscale’s ETHE fund saw an exit of 1.18 million ETH from the fund in less than two months. According to Farside Investors, this amount is equivalent to over $2.7 billion.
Despite the new Grayscale Ethereum Mini Trust attracting nearly $260 million, it has not been able to offset the widespread exit from the ETHE fund.
On the other hand, Bitcoin ETFs traded in the U.S. have shown more resilience, returning after periods of outflows. For instance, after experiencing $1.2 billion in outflows between August 27 and September 6, Bitcoin funds saw a subsequent net inflow of over $400 million.
