The price of Bitcoin and its open interest (OI), which represents the number of total derivatives contracts yet to be settled, has been relatively correlated over the last few months and remains high, while the total altcoin open interest has plunged 55% since an all-time high in March.
According to a recent Bitfinex Alpha report, Bitcoin’s dominance of the cryptocurrency space – meaning its market share of the total market capitalization – has reached its highest value since March 2021 at 57.7% after the market drop in early August. September’s downturn, however, saw altcoins rise while BTC’s dominance dropped.
These figures suggest that sellers are nearing exhaustion, with the current aggregated value of these crypto assets standing at a mere $8.75 billion. According to analysts at Bitfinex, this decline is part of a significant shift in the relative strength of altcoins compared to Bitcoin.
The report suggests that investors are moving away from the safety of Bitcoin and betting on other digital assets. It reads that during market downturns traders “often liquidate their altcoin holdings either for Bitcoin or fiat” which increases BTC’s dominance as they move to safety during volatile periods.
The recent downtrend, however, saw Bitcoin’s dominance drop 1.3% while altcoins’ market capitalization increased, suggesting investors “might be seeing potential value or receiving positive signals from the altcoins markets.”
Source: Bitfinex Alpha
Bitfinex’s analysts, however, point out that this could also be a result of current market dynamics, as the sell-off has been driven by exchange-traded fund (ETF) outflows and spot market selling.
The analysts added that as some altcoins have already seen declines above the 80% mark from their all-time highs “it is very likely altcoins have reached a point of seller exhaustion.”
Altcoins have been underperforming Bitcoin since the beginning of last year, with some exceptions. Bitcoin’s recent plunge in dominance, however, suggests its dominance could be “approaching a local top” that would mean that the “altcoin sector as a whole could continue to outperform Bitcoin during market upsides and show resilience during downturns.”
Featured image via Unsplash.
