Bitcoin dominance in the total crypto market value has reached its highest level in approximately 20 months, indicating a cautious sentiment prevailing in the digital assets space.
On Thursday, Bitcoin hovered around $25,000, resulting in a market capitalization of $484 billion, accounting for 45.8% of the combined value of over 10,000 coins tracked by CoinGecko. This represents the highest percentage since October 2021.
Bitcoin took a fall after SEC lawsuit
Last week, the US Securities & Exchange Commission filed lawsuits against Binance Holdings Ltd. and Coinbase Global Inc., classifying numerous smaller tokens as unregistered securities. This classification triggered a sell-off in those coins as their tradability could become more challenging.
In contrast, Bitcoin is considered a commodity by US officials, which has helped it withstand the broader market decline caused by the SEC’s scrutiny of alternative coins like Binance’s BNB, Cardano’s ADA, and Solana’s SOL.
“Traders are opting to hold back their investments amidst the regulatory backlash, particularly with regard to altcoins,” commented Michael Safai, Partner at Dexterity Capital.
Furthermore, the Federal Reserve’s indication of potential future monetary tightening, following a pause in its rate-hiking cycle this month, has influenced overall crypto sentiment.
Bitcoin’s dominance in the cryptocurrency market experienced a peak of 45.65% in April, with some fluctuations observed thereafter. However, in recent weeks, its dominance has been steadily increasing.
Another potential factor contributing to this trend is the upcoming Bitcoin halving expected to take place in either April or May 2024. The Bitcoin halving occurs approximately every four years and involves a reduction in the reward given to miners for creating new Bitcoin blocks. This reduction effectively slows down the rate at which new bitcoins are generated, aiming to manage inflation and preserve the limited supply of bitcoin over time.