On January 30, Bitcoin accounted for 44.82% of the total cryptocurrency market cap, the highest percentage since June. In September, the Bitcoin Dominance Index was as low as 38.84%.
The index usually rises when most cryptocurrency investors reduce their exposure to smaller coins and look for safety in Bitcoin. Reasons include better Bitcoin liquidity and lower volatility than alternative cryptocurrencies, or altcoins, mainly in a bear market.
Bitcoin market dominance for further growth?
As of January 31, bitcoin is up 38% year-to-date at around $23,000. In comparison, the second largest cryptocurrency, Ether
ETH
cursors down
$1,575 USD
, gained 30% in the same period, which indicates that most investors are still attracted towards Bitcoin so far in 2023.
From a technical perspective, the Bitcoin Dominance Index may rise further in the coming weeks as it reclaims its 50-week exponential moving average (red wave in the chart below) as support.
Bitcoin Dominance Index Weekly Performance Chart. Source: TradingView
In doing so, the index could rise towards 48.5%, which has been resistance since May 2021.
On the other hand, independent market analyst Rekt Capital sees the Bitcoin Dominance Index rising towards 46%, which coincides with the upper trend line of the giant descending channel pattern, as shown in the monthly time frame chart below.
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Bitcoin Dominance Index monthly performance chart. Source: TradingView, Rekt Capital
A short-term bullish scenario appears in the Bitcoin Dominance Indicator chart in line with a similar bullish trend in the Bitcoin spot market, with bulls looking towards $25,000.
Ethereum vs Bitcoin is the main driver of BTC dominance
The bearish argument is that the Bitcoin Dominance indicator may start to lose its bullish momentum after testing the descending channel resistance, as it has done on several occasions in the recent past.
Related: Bitcoin Sees Most Long Liquidations in 2023 as BTC Price Tag $22.5K
“Bitcoin Dominance Beyond Red in the Monthly TF,” Rekt Capital noted, while pointing to the horizontal trend line support for the indicator near 44.11%. The analyst adds:
“A monthly close above the red could set BTCDOM for another dip into the red which should benefit Altcoins.”
Bitcoin Dominance Indicator monthly price chart (zoom in). Source: TradingView, Rekt Capital
The above analysis shows where ETH is eyeing a potential bullish reversal against Bitcoin in the coming weeks.
Notably, the ETH/BTC pair has been consolidating near the (shaded) support area within the 0.0676-0.0655 BTC range since Jan 24.
ETH/BTC daily price chart. Source: TradingView
ETH/BTC is likely to see a rebound rally towards the bearish (black) trend line resistance around 0.075 BTC if it continues to hold the support area. This, in turn, would reduce Bitcoin’s dominance in the cryptocurrency market as Ether’s share would rise to 20%.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.
