Bitcoin Dominance Could Soar to 90% amid Economic Crisis, Crashing Altcoin Market

According to Qiao Wang, product manager at Messari, more and more retailers would drop their altcoin investments to seek protection in bitcoin in an intensifying financial crisis.

The New York-based angel investor said on Wednesday that he expected Bitcoin's dominance to rise to over 90 percent by the end of the ongoing economic slowdown. The term "bitcoin dominance" refers to the market value of bitcoin in relation to that of the broader cryptocurrency market with more than 5,000 assets.

Mr. Wang was guided by the US dollar, a global reserve currency, the acts as a hedge for emerging markets in times of a global financial crisisBitcoin could offer similar protection to traders with extreme exposure to highly volatile and illiquid crypto assets. He wrote in a tweet published on Wednesday:

"Bitcoin is too (alternative cryptos) like the USD to EM currencies, except that the Bitcoin Open Miners Committee cannot inflate the supply unilaterally enough to offset the relative increase in demand."

Bitcoin beats altcoins

Mr. Wang's statements came at the time when almost all digital assets with higher, middle, and lower caps saw losses against Bitcoin. For example, the second largest token by market cap, Ethereum, has been trading more than 25 percent lower than Bitcoin since the end of the year. Similarly, the third largest XRP declined by around 24 percent.

From February 15 to date, a total of around $ 58 billion in capital flowed from the Altcoin market. Part of it hit the US dollar market as investors looked for cash to cover their margin calls. And the other ended up in Bitcoin, which increased its dominance from its annual low of 61.98 percent to 67.91 percent this Wednesday.

Bitcoin, Bitcoin dominance, Btcusd, cryptocurrency

Bitcoin dominance rises with increasing economic crisis Source: TradingView.com

Bitcoin's market cap, on the other hand, fell from $ 189 billion to $ 121 billion over the same period. It shows that cash continues to be an undeniable hedge against deteriorating macroeconomic sentiment, which is shown by the upward movement in the US dollar currency index (ticker: DXY). It was 5.83 percent above its YTD low at the time of this writing.

Haven Sentiment Up

After the U.S. government's $ 2 trillion corona virus relief package, DXY has dropped by up to 2.86 percent. At the same time, Bitcoin has increased by a modest 1.94 percent.

The upward trend followed a bullish narrative that projects the cryptocurrency as a deflationary alternative to an open dollar supply system. While central banks and governments are introducing key stimulus programs to protect their economies from the coronavirus crisis, some top analysts believe that some of the free money would enter the Bitcoin market.

Altcoins are most likely to feel bankrupt as investors will feel real market pressure in the coming weeks or months. While Bitcoin might feel the same because of higher cash demand, the likelihood of stealing capital from the Altcoin market seems to be higher due to its relatively lower volatility and higher liquidity.


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