The cryptocurrency market has been battered due to several macro-economic factors and industry-wide issues, but bitcoin, the largest cryptocurrency by market cap, has seen its dominance soar this week.
The current bitcoin dominance stands at 45%, a result of the Terra ecosystem crash and its pull effect on other cryptocurrencies. The last time Bitcoin’s dominance crossed the 45% range was seven months ago, weeks before it reached its all-time high of $69,000.
However, with the selling pressure in the cryptocurrency market, macro-economic issues such as oil prices and supply chain crises, and the strengthening dollar, it would be a surprise if Bitcoin were to go on a bull run in the coming weeks.
Bitcoin closed in the red for the seventh consecutive week signaling the start of the crypto winter. Although this is bad enough, the returns from other cryptocurrencies make it seem mild. The 2021 growth of layer-1 protocols has been reversed, and many of them are a shadow of their selves. Solana is trading at 82% off its all-time high, Avalanche is trading at 80% off its all-time high, and the terra ecosystem has been wiped off following its crises weeks ago.
However, Bitcoin is 57% off its all-time high and is still battling the $30,000 resistance. It also led the outflows of the cryptocurrency market with $154 million, as the institutional crypto AUM (Asset under management) dropped to $38 billion, its lowest point since July 2021.
Undoubtedly, the death of the Terra ecosystem and the billions of dollars lost in it played a part in bitcoin’s dominance increase. The level of fear in the market made many cryptocurrencies lose substantial value, but bitcoin held up well.
The market cap dominance is a metric used to define the proportion of one asset to the whole market. Historically, bitcoin’s dominance increases during bearish markets due to how fast other cryptocurrencies lose their value. With the crypto market shedding $500 billion in market value this month alone, it is unsurprising to see bitcoin's dominance rise.
