Bitcoin remains the most widely used cryptocurrency, but the narrative that Bitcoin is the only cryptocurrency that matters may be changing. This is due to the fact that Bitcoin is still the most widely used cryptocurrency, but the narrative that Bitcoin is the only cryptocurrency that matters may be changing. This is due to the fact that Bitcoin is about to enter the fifth BTC dominance cycle , which has historically historically coincided with periods of increasing Bitcoin dominance.
If you look at the history of Bitcoin, you can see a pattern.
Bitcoin has been on a tear the last few months, and with the most recent spike to $4500, it appears to be headed for a repeat of the famous 2017 crypto rally. After the rally hit bull levels in January and February of 2017, the price, as measured by Coindesk’s bitcoin dominance index (BDI), bottomed at over 50% in April before returning to the $4000 to $4500 range. In July 2017 the DBI hit a high of 65%, which was the highest since the 2014 rally. In addition to the DBI, one of the most popular metrics for bitcoin price analysis is the Bitcoin dominance index (BDI). The BDI is a simple metric that ranks the amount of daily bitcoin
For historical comparison purposes, it is also interesting to note that the dominance chart looks about the same today as it did in early 2017. While the markets have been in recession since the 12th. The month of May showed a decline, bitcoin’s (BTC) dominance fluctuated wildly, against the prevailing trend of 2021. BTC’s dominance has steadily declined from about 70% in January to less than 40% when the collapse began. At that point, BTC’s dominance was at its lowest level since the summer of 2018. Since then it has recovered to a level of over 43%. If the pattern is the same this time, the market will likely eventually reach the levels of summer 2017, when the altcoin season was just getting started, and the $20,000 peak in bitcoin prices in December 2017 is still a few months away. Although the models draw interesting parallels, BTC’s dominance is obviously not necessarily an indication of price. However, it does provide an indication of the performance of the core asset relative to the rest of the markets and supports certain trends. So what are the likely scenarios for BTC dominance, and what will be the consequences for the markets?
Monitoring of cash flow
The cash flow model is a possible predictor of where the markets might go. In this model, money flows from fiat to bitcoin, then down from the large capitals to the small altcoins via the medium capitals, before returning to BTC and finally to fiat. This pattern is interesting because it pretty much repeats what happened in 2017, except that the cycle repeated itself twice when BTC jumped towards the end of the year. So, if the 2017 scenario repeats itself, BTC’s dominance could continue until the flagship reaches a new price peak, only to fall when the altcoin season picks up steam. Apart from the striking similarity of the dominance charts, the behavior of the alts also provides some evidence that they can cooperate with historical cycles. In early May, Cointelegraph reported that altcoins are turning their previous cycle high into support – the last time this happened was in 2017. If the cycle repeats itself, alternative markets could reach new stratospheric heights in 2021. While May’s performance doesn’t do much in this regard, there’s still no reason to believe that BTC and the broader markets won’t move in line with long-term trends. Sam Bankman-Fried, CEO of FTX Exchange and Alameda Research, told Cointelegraph: If we enter a prolonged bear market, I would expect BTC’s dominance to increase, as it did in 2018-2019; but the correction we have seen so far is not enough to cause that.
For individual investors looking to track cash flows, there is an important consideration. In an interview with Cointelegraph, Robert W. Wood, managing partner of Wood LLP, warned: The elephant in the room for diversification is taxation. He added: Prior to 2018, many investors could argue that exchanging one crypto currency for another was not taxable under Section 1031 of the Internal Revenue Code. But the law was changed in late 2017. In fact, Omri Marian, director of the graduate tax program at UC Irvine School of Law, has confirmed that cryptocurrency transactions are likely to trigger tax liabilities, explains Cointelegraph : Any exchange of a cryptographic asset against another is a taxable event. Therefore, regardless of the profit motive, an investor in crypto assets should keep in mind that there may be tax costs associated with rebalancing a portfolio. Shane Brunett, CEO of CryptoTaxCalculator, went to business by telling Cointelegraph: If an investor switches from BTC to Altcoins, the gain or loss will be realized in that tax year, regardless of whether the investor cashes in the currency. In addition, he explained that the investor no longer owns an asset as a result of this activity, which affects eligibility for the long-term capital gains reduction. Therefore, keep in mind that cash flow tracking may have its own costs and there is no guarantee that the arrangement can be repeated, as new variables may be affected.
The biggest difference between 2017 and now is the presence of institutions in the markets. This is the case at least for bitcoin and, to some extent, for major altcoins like Ether (ETH). Smaller traders and investors dominate most alternative markets, including almost all small-cap coins and e-currencies like dogecoin (DOGE). Looking at the dominance charts, BTC seems to have gotten a boost in the late 2020s, when institutional investors’ interest in cryptocurrencies began to grow. His dominance continued to grow until about January. However, there are indications that institutions may be behind BTC’s recent rise. On the 21st. In May, it was revealed that Wale bought $5.5 billion worth of BTC when prices were below $36,000; two days later, crypto-currency hedge funds MVPQ Capital, ByteTree Asset Management and Three Arrows Capital confirmed that they were buyers of Dip. It is therefore possible that the sudden resurgence of bitcoin’s dominance is not due to normal market cycles, but to institutional whales buying BTC at a discount.
Risk, but how far?
The question is this: To what extent will institutional commitment change the pattern of BTC dominance from 2017? Perhaps the most important difference between institutional and retail investors is that institutional investors are much more likely to monitor market conditions and limit risk accordingly. The result is that BTC’s dominance is increasing as investors walk away from risky alts. Related: For how long? When bitcoin fell, institutions held it. Judging by the bearish buy reports, however, there is no reason to believe that investors will give up on cryptocurrencies – at least for now. Moreover, bullish sentiment continues to hover, unencumbered by the market chaos of recent weeks, as evidenced by reports that interest in BTC appears to continue to grow. Therefore, there is still a good chance that if interest in BTC continues and no major bad news emerges to disrupt sentiment around cryptocurrencies, the cash flow model could once again play a role. Unless history changes, BTC’s dominance will continue for some time before investors start investing in the major altcoins again.What is Bitcoin? It’s a virtual currency, similar to the US Dollar (USD) or the British Pound (GBP), that can be used digitally to purchase goods and services. But that’s about where the similarities end. While bitcoin is issued and managed without any central authority whatsoever: there is a network of computers that updates the public ledger, a system that records bitcoin transactions. This decentralized system ensures that no one can control the bitcoin supply.. Read more about btc alt cycle and let us know what you think.
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