Bitcoin’s price is teetering on the edge of surpassing its all-time high, sparking interest across the financial sector. However, while Bitcoin continues to ascend, the remainder of the cryptocurrency market is not faring as well. Altcoins, which had previously played a significant role in overall market growth, are lagging behind this time. This trend has resulted in the total cryptocurrency market cap falling short by $500 billion compared to previous peaks, highlighting a growing disparity between Bitcoin’s expansion and the rest of the crypto realm.
Bitcoin’s Dominance Prevails as Altcoins Struggle
During the previous major Bitcoin surge in November 2021, the total crypto market capitalization nearly reached $3 trillion, with altcoins such as Ethereum (ETH) and Solana (SOL) joining Bitcoin in scaling new heights. However, this year presents a different landscape. As of this week, the total crypto market cap hovers around $2.5 trillion. The lackluster performance of altcoins is hindering overall market growth, even as Bitcoin edges closer to price discovery.
Bitcoin’s steady ascent has propelled its market dominance to over 60%, a level not seen since early 2021. Analysts attribute this surge in Bitcoin’s market share primarily to institutional interest, as significant investments pour into Bitcoin-focused exchange-traded funds (ETFs) in recent weeks. The emergence of these ETFs is diverting funds away from smaller coins and consolidating them into Bitcoin, exacerbating the imbalance in the crypto market.
Ethereum and Other Altcoins Trail Behind
One of the most notable changes in this cycle is Ethereum’s underperformance. In 2021, Ethereum’s market cap reached $570 billion as it hit an all-time high price of $4,878. During a brief rally in March of this year, ETH’s market cap surged again, nearing $490 billion. Currently, however, Ethereum’s value stands at just $317 billion, a significant decline from its peak. Resistance at the $2,650 mark has hindered Ethereum’s progress, dampening the performance of the broader altcoin market.
The decline extends beyond Ethereum to major altcoins like Solana, XRP, Dogecoin, and Cardano, all of which have experienced significant drops from their peaks. For instance, Cardano’s market cap has plummeted by 88% from its peak, while Dogecoin has fallen by 76%. Prominent tokens like Polkadot (DOT) and Shiba Inu (SHIB) have also dropped by over 90% from their peaks, indicating a lack of momentum across the board for these popular coins.
The sole major exception among altcoins is Binance Coin (BNB), which is just 16% away from reaching its previous record price. However, even BNB’s performance has not been sufficient to significantly alter the overall trend in the altcoin market.
Reasons Behind Altcoins’ Struggles This Time
Several factors have contributed to the current trend in the crypto market. One primary reason for the shift is the increasing dominance of stablecoins and institutional interest in Bitcoin ETFs. Stablecoin capitalization has seen significant growth, currently standing at $177 billion, up from around $120 billion in 2021. As more funds flow into stablecoins, there is less liquidity available for speculative altcoins, contributing to the sluggish growth.
The surge in Bitcoin ETFs has also played a role in diverting attention from altcoins to Bitcoin. In the past week alone, U.S. spot Bitcoin ETFs witnessed record-breaking inflows, with over $870 million flowing into BlackRock’s iShares Bitcoin ETF (IBIT). This institutional enthusiasm has led to a large-scale transfer of funds from other parts of the crypto market into Bitcoin, stalling the altcoin market.
Bloomberg ETF strategist Eric Balchunas recently highlighted that these inflows have been driven by “fear of missing out” (FOMO) as investors rush to invest in Bitcoin before it potentially surpasses its all-time high. If this trend continues, Bitcoin could soon experience a parabolic rise, further increasing its dominance and leaving altcoins trailing behind.
The Future of Altcoins
While some analysts speculate that an “altseason” may be on the horizon, this shift may only occur if retail investors begin pouring into the market. In previous Bitcoin bull runs, retail investors played a crucial role in driving demand for altcoins, consequently boosting the entire market. However, retail FOMO seems to be absent this time, possibly due to economic uncertainties or a preference for lower-risk investments.
Until retail investors re-enter the market or institutional interest expands to include more altcoins, Bitcoin is likely to maintain its lead, with altcoins struggling to reclaim their former highs. For now, Bitcoin’s continued ascent appears inevitable, while the rest of the crypto market remains subdued as investors carefully weigh the potential risks and rewards.
