Bitcoin is back in the headlines as its dominance has reached a 4-year high, and everyone is talking about the future of altcoins and the direction of the market.
As of early May, bitcoin’s dominance (the percentage of the total market it represents) is at 64.98% its highest since January 2021.
This comes as bitcoin’s price has topped $97,000, just shy of its all-time high of $108,786. According to TradingView and CoinMarketCap, bitcoin is now worth nearly $2 trillion, and the broader digital asset market is $3 trillion.
Several factors are behind bitcoin’s strength. A big one is institutional investors. Metaplanet just raised $25 million through bond sales to buy more bitcoin, and Prime Two announced they will drop Ethereum and focus solely on BTC.
Not to mention Strategy, which has been relentlessly accumulating bitcoin, and now holds over 2.5% of the entire bitcoin supply.
David Morrison, Senior Market Analyst at Trade Nation noted that bitcoin has outperformed most altcoins recently.
“It has high acceptance relative to its peers and the more speculative coins thanks to its relatively friendly regulatory environment, which, under this Trump administration, is expected to improve further … [and its] supply is strictly limited.”
Morrison also said bitcoin’s history of resilience during market turbulence is a big plus, adding:
“Investors can now see a decent history of bounce-backs following large pullbacks.”
The recent rise in bitcoin dominance has also been driven by U.S. economic news, particularly stronger-than-expected job numbers. In April, U.S. nonfarm payrolls rose 177,000 beating forecasts of 133,000. The unemployment rate remained at 4.2%.
A strong jobs market is good for the economy but has dampened hopes for rate cuts. Rate cuts often lead to more investment in riskier assets like digital assets, so the possibility of delayed rate cuts has made some investors cautious.
This means investors are moving away from riskier altcoins. But bitcoin remains a safe haven asset because of its fundamentals and better regulatory clarity, absorbing most of the idle capital in the market.
Therefore, bitcoin seems to be winning anyway. Some investors are moving out of U.S. Treasuries and other traditional assets and into bitcoin as a safe haven during economic uncertainty.
As bitcoin goes up, altcoins are down. Big names like Ethereum, Solana and Dogecoin are down 54%, 43% and 61% from their highs respectively.
Ethereum is now trading at its lowest point compared to bitcoin since 2020.
The drop has led to debate on whether an altcoin season is near. Historically, the altcoin season starts when bitcoin dominance peaks and capital flows into smaller digital assets. But that hasn’t happened yet despite multiple market cycles.
According to analyst Darky, 65% dominance could be the trigger. “An altcoin season usually ignites when capital flows shift from Bitcoin to altcoins,” he said.
But not everyone agrees. The team at Milk Road says the market isn’t ready yet. “Only 17% of altcoins have outperformed BTC over the last 90 days. That’s not rotation. That’s BTC dominance holding the wheel.”
While many analysts believe that a jump in bitcoin dominance could be a warning that big drops are around the corner, Thomas Fahrer, co-founder of Apollo warned that this cycle might be different.
“When major players like BlackRock and Saylor buy Bitcoin, they typically hold it,” he said.
Others believe multiple conditions must align before an altcoin season can truly start.
According to Nic, co-founder of Coinbase, “Bitcoin dominance must fall below 54%, the Fed must signal an end to quantitative tightening, and Bitcoin needs to reach a new all-time high while capital shifts into alts.”
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