Bitcoin (BTC) recorded significant gains recently, but that does not mean the market is poised for a full bull run.
On-chain patterns analyzed by CryptoQuant Quicktake author Woominkyu show that previous bull markets have kicked off while Bitcoin witnessed a decline in market share dominance. Unfortunately, the opposite is the case now.
Diversifying Investor Capital
According to Woominkyu, a decline in Bitcoin’s dominance signals investors are diversifying their funds into alternative coins (altcoins), other cryptocurrencies besides BTC. In other words, the market has to experience an altcoin season before BTC can have its bull run.
When investor capital moves from BTC to altcoins, the broader market can witness a major rally that would trigger a bull run. Woominkyu said BTC could witness a new bull run if its dominance decreases.
“Looking at this chart, we can see that, historically, major bull runs across the market have coincided with declines in Bitcoin dominance. If this pattern repeats, we might anticipate the beginning of a new crypto bull market as Bitcoin dominance decreases,” the analyst said.
Bitcoin Dominance Is Increasing
Over the past week, Bitcoin’s dominance has been increasing. Data from CoinGecko shows that the leading cryptocurrency accounted for 54.7% of the total market share as of October 24. However, at the time of writing on November 1, the share had increased to 58.2%.
The last time Bitcoin’s dominance rose to this level was during a brief spike to 64.8% on August 5, shortly before the yen-dollar crisis that saw the crypto market bleed millions took place. A more sustainable rise in Bitcoin’s dominance was seen in March 2021, during the last bull cycle. The asset’s market share had remained above 60% for about six months before then.
Considering Woominkyu’s analysis, BTC’s dominance would need to fall before the asset can witness another bull run. However, this may take a while because the Bitcoin network is seeing a huge capital inflow.
The launch of spot Bitcoin exchange-traded funds (ETFs) in the United States and several other markets paved the way for traditional finance investors and institutions to gain access to the world’s largest blockchain network. These funds, especially U.S. ETFs, have recorded large inflows since October. This persistent capital flow has also driven the price of BTC above $73,000 for the first time since March.
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