In both cycles, Bitcoin’s dominance fell within a month of its respective peaks. Dogecoin’s pattern in this cycle was similar to that of Ripple’s XRP in 2018.
The dominance of Bitcoin (BTC) in the cryptocurrency market fell to January 2018 levels. The boom in market capitalization of many altcoins led to this drop in the percentage of Bitcoin’s total market capitalization.
Something similar happened during the bullish run in late 2017 and early 2018. In that period, BTC reached USD 20,000 per unit for the first time, according to data from a report from the firm Coin Metrics.
The report deals with the free-floating supply (or liquidity) of a cryptocurrency rather than the total supply of issued coins. The figure comes from calculating the number of currencies that move in the market.
The recent study draws a parallel between the two moments of the cryptocurrency market. Then, there was a significant flow of capital from Bitcoin to altcoins during the height of the price boom.
In both runs, Bitcoin’s free-floating supply-based dominance fell to the level of 40% or less, about a month after peaking, the analysts note.
In both cases, new altcoins emerged, diverting some of Bitcoin’s capital and distributing it among small-cap assets, many of which went extinct.
The market capitalization of Bitcoin and altcoins was very similar in both cycles, according to the study.
What Are the Major Altcoins During This Cycle?
The report of this market cycle highlights the increase in the prices of Ether (ETH), Ripple (XRP), Cardano (ADA), and Binance Coin (BNB), among other cryptocurrencies. The rise that cryptocurrency memes experienced, with Dogecoin (DOGE) leading and Shiba Inu (SHIB) following, is also prominent.
The rise in the price of these cryptocurrencies caused an all-time high of market capitalization for altcoins above USD 1 trillion. According to the report, these types of increases attract retail investors and the attention of mainstream media.
Another relevant aspect is that ETH has barely managed to cover 45% of the total capitalization of altcoins at its highest point in this cycle. However, it has set a new capitalization all-time high above USD 460,000 million.
In the previous cycle, the still second most valuable cryptocurrency in the market reached a peak of dominance above 37%. On this occasion, data from CoinMarketCap indicates that it is barely close to 20%.
Analysts highlight a difference between the two moments regarding the cryptocurrencies ETH and BTC. In the 2017-2018 run, Ether had little correlation with Bitcoin, but now both cryptocurrencies have risen and fallen together.
Performance of Dogecoin and XRP vs. That of Bitcoin
In 2018, Ripple’s cryptocurrency XRP had prominence in giving way to an altcoin season. At such times, most major cryptocurrencies other than Bitcoin outperform the latter.
That year, XRP’s floating free supply capitalization was around USD 200 billion. At its peak, it approached the maximum capitalization that Bitcoin had reached in the previous December.
The pattern that XRP showed at the time resembles the behavior of DOGE during the current market cycle. The cryptocurrency meme barely exceeded USD 70 billion (less than a tenth of the BTC peak above USD 900 billion).
Unlike ETH, both DOGE and XRP have had a low correlation with Bitcoin in 2021. The cryptocurrency meme even reached a correlation of 0 compared to BTC a few weeks ago.
By Alexander Salazar
