Published: June 21st, 2023
A new report from TradingView shows Bitcoin’s market capitalization has stepped over the 50 per cent line, making its footprint bigger than all other cryptocurrencies combined.
The analyst firm’s BTC Dominance metre crossed the halfway mark on Monday, 19th June. It was the first time since April 2021 that Bitcoin had claimed the majority of the market on its own. Back then, Bitcoin’s price started falling when China announced its complete ban on crypto mining and fell further when Tesla cooled its previous enthusiasm for the asset due to carbon footprint concerns.
BTC dominance last came close to the halfway metric in May 2022 when the entire crypto market fell on news of sticky high inflation in the USA, which prompted robust monetary tightening from US central bankers.
While Bitcoin fell sharply at the time, number two coin Ethereum (ETH) fell harder, taking the ETH/BTC pair southward to a measly 0.05 ratio.
Stern regulatory action has likely also made BTC a sturdy alternative to altcoins like Solana and Cardano, which the SEC has labelled ‘unregistered securities’. Amid a flurry of enforcement actions and lawsuits recently, SEC chairman Gary
Gensler has said that he sees Bitcoin as a commodity.
In its high-profile lawsuit against leading crypto exchange Binance, the SEC also labelled the firm's native token BNB a security. The token was previously the fourth largest crypto by market cap, but has lost more than 20 per cent of its value since thebeginning of June.
TradingView’s BTC dominance metric has been criticized in the past for under-counting Bitcoin’s true market share since it includes stablecoins in the calculation. Critics say stablecoins aren’t ‘real’ cryptos, basically just US dollars reformatted to trade on a blockchain.
It's worth noting though that even the stablecoin market has lost value this year, dragged down when Paxos was forced to close out its BUSD token in February, taking billions of dollars in tokens out of circulation.
After a tumultuous and underwhelming 2022, crypto traders were relieved to see BTC fighting back.
A January 2023 report from Blockchain analytics firm Glassnode heralded the return, saying Bitcoin's realized price, or the average price investors are paying for BTC at any given time, had risen to USD 19,600. For the previous 150 days, BTC’s average price had been USD $18,000.
The uplift meant crypto’s top coin was back in profit territory. It headed to USD 21,000 the following week and gradually kept going.
BTC rallied over the weekend touched north of the psychologically important USD 20,000 level on Saturday 14th January. It was the first time since the implosion of troubled crypto exchange FTX. At that level it's profitable for mining firms to switch their expensive ASIC machines back on and start validating transactions again on the Bitcoin network. The 20k level also means the average Bitcoin hodler could make a profit if they liquidated their BTC holdings now.
Miners will be especially relieved, Glassnode says, that the economics of mining BTC have shifted back in their favour. Mining BTC requires robust computational power to solve complex math equations and create more Bitcoin. Mining one new
Bitcoin currently costs about USD 18,700. When Bitcoin trades above that level, it means there is an opportunity to turn a profit.
BTC's price shot upward last week after news that US inflation started to cool off. The Federal Reserve raised its benchmark rate again and again in 2022 to keep record-high inflation at bay. The extended effect weas to bring down the price risk assets, impacting both traditional equities and Bitcoin.
The last time the Fed raised interest rates was December, when it added another 50 basis points. This was seen as a more cautious rise compared to previous 75 basis-point hikes. Last Thursday, the US Bureau of Labor and Statistics published a Consumer Price Index report which showed that inflation had dropped back to 6.4 pe cent, down from 7 per cent seen in November.
This looks to have spurred investor confidence, with hopes that the Fed is now on track to soften what has been a ‘hawkish’ policy direction on rates.
The first indications of BTC’s return to form came in late 2022 when blockchain analytics firm Kaiko released figures showing that BTC's 20-day volatility had tracked the NASDAQ for the first time in nearly 24 months.
It was an unexpected swapping of roles, where Bitcoin’s price stayed more or less the same since the beginning of September. The normally stable NASDAQ and the S&P 500 had dropped by 12 per cent and 11 per cent respectively in the same period.
Bitcoin’s price has historically been correlated with technology stocks, though with a higher ‘beta’ (propensity for volatility) than other financial assets. Despite the impressive gains posted in 2021, its high beta rating has kept many investors from relying on it as safe-haven asset. Despite a price plunge in June, BTC and other major cryptos have been some of the best-performing assets in Q3, after the mighty Greenback.
Bitcoin’s price did drop back to lows last seen in 2020 during the week commencing 10th October, after core US inflation topped another 40-year high. Both BTC and equities fell on the news, before quickly bouncing back to their previous ranges.
The previous plunge seen in June 2022 followed the release of American inflation data for May, which showed consumer prices rising at a burning hot rate of at 8.7 per cent. Investors saw it as a sign that the Federal Reserve wouldn’t be altering its aggressive policy course any time soon, prompting a risk-off move that shifted money away from riskier assets.
However, while high inflation held firm for much of 2022, crypto’s price action stayed relatively stable with subsequent updates to the consumer price index (CPI) inflation measure. Stocks, on the other hand, have been in a slow-but-steady decline.
BTC’s stability was all the more notable given the hawkish stance taken by central banks worldwide, which have turned many bonds into an opportunity for rapid gains. As Reuters reported in September, Fed policy has sent bond yields skyrocketing.