A recent recovery in the crypto market has been heavily biased towards Bitcoin (BTC), with the token now accounting for 47% of the market.
BTC surged over 6% in the last 24 hours and reclaimed the $31,000 level. The focus is now on whether the token can hold those gains as it has been around $30,000 for over a month.
The token has a market cap of $599.2 billion compared to a global crypto cap of $1.29 trillion.
But while BTC has held its ground somewhat, most other altcoins, with the exception of Ethereum, have seen drastic declines in value. This, coupled with the recent Terra crash, has elevated BTC dominance to levels last seen in July 2021.
Still, this level of BTC dominance could indicate that a strong rally is imminent.
High BTC dominance precedes altcoin rally
As seen in July, high BTC dominance usually comes just before a strong rally. This can be clearly seen in October 2021, where the market shot to record highs after BTC dominance reached around 47%.
High BTC dominance usually indicates that the altcoin market is undervalued, which attracts investors to the space. Buying then tends to spill over into BTC as well, driving up valuations overall.
But the macroeconomic scenario currently differs from that in 2021. The Federal Reserve has started to reduce liquidity in the market – a key factor behind the stellar crypto rally over the past two years.
This can prevent potential attempts at price gains.
The dominance is currently rising alongside alts, which is positive as it suggests they likely still have room to run. My macro sentiment remains largely bearish, however there is a strong possibility that we may see an extended rally in the near term.
-Crypto analyst Miles Deutscher said on Twitter
Altcoin Rally or Dead Cat Bounce?
Despite their recent weakness, most of the top altcoins have tracked BTC’s recent recovery.
However, analysts are warning that this could be another bull trap as the token has been struggling to clear $32,000 for over a month. A drop in the token also causes broader losses.
With US stock markets set for a positive open this week, a short-term crypto rally could be on the cards.
With more than five years of experience in global financial markets, Ambar intends to apply this knowledge to the fast-growing world of crypto and DeFi. His main interest lies in finding out how geopolitical developments can affect the crypto markets and what this could mean for your Bitcoin holdings. When he’s not scouring the internet for the latest breaking news, he’s playing video games or watching Seinfeld reruns. You can reach him at [email protected]
The content presented may contain the personal opinion of the author and is subject to market conditions. Do your market research before investing in cryptocurrencies. The author or publication assumes no responsibility for your personal financial loss.
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