Rising Bitcoin Dominance Suggests That Crypto Markets Are Still Bearish

While the total crypto market cap failed to settle above the important $2T level and pulled back towards $1.85, Bitcoin Dominance moved towards yearly highs.

Why Bitcoin Dominance Is Important

Bitcoin Dominance measures the Bitcoin market cap as a percentage of the total crypto market cap. As new projects gained popularity, the share of Bitcoin in the total crypto market cap declined from 73% at the start of 2021 to the recent lows near the $39% level.

If Bitcoin Dominance grows at a time when the total crypto market cap declines, altcoins suffer a double blow. Investors are moving funds out of crypto markets, and the ones who stay are buying Bitcoin. Not surprisingly, this is bearish for leading coins like Ethereum, XRP, Cardano, and others.

Why Bitcoin Is Gaining Market Share

As the number of institutional buyers increased, crypto markets have started to act like traditional financial markets.

At times of uncertainty, investors move funds to safe-haven assets. From a big picture point of view, the U.S. dollar, gold, and U.S. Treasuries often serve as such assets.

However, there are safe-haven assets in each asset class. For example, in equity markets, traders often buy utilities stocks to protect themselves from additional downside.

In crypto markets, there are no questions about safe-havens as Bitcoin is the one and only coin which can serve in this role.

The rising Bitcoin Dominance shows that investors who are willing to bet on cryptos are worried about the potential downside and want to concentrate their funds in the safest coin.

In this light, traders and investors should keep an eye on the dynamics of Bitcoin Dominance in the upcoming weeks. In case Bitcoin Dominance begins to decline, it may signal that traders are ready to buy more coins instead of putting all their funds in Bitcoin, which will be bullish for crypto markets.