Bitcoin Dominance Index declines - Kakiforex | Forex markets for the smart money. Bitcoin Dominance Index declines Bitcoin Dominance Index declines

April 13, 2021

Bitcoin Dominance Index declines

 As the title of the article suggests, the bitcoin dominance index is declining in the long term. What does this mean? The dominance index is, roughly speaking, the percentage of the capitalization of a particular cryptocurrency in the total cryptocurrency market capitalization. That is, for example, at the moment the capitalization of bitcoin is $1.09 trillion, and the total market capitalization is $2.03 trillion. Thus, the bitcoin dominance index is 54%. Experts note that this is the minimum value for digital gold since April 2019. This fact suggests that market participants are beginning to pay more attention to altcoins. It is the alternative cryptocurrencies that are starting to grow in price, because more and more investors are willing to take risks and explore new tokens.

If bitcoin is constantly growing, and forecasts predict its growth to at least $100,000 per coin, why is it starting to lose popularity, instead of gaining it? From our point of view, it's because bitcoin is already very expensive. No matter how much it grows in price, with the conquest of new heights, the number of new investors will decrease because it is one thing to buy bitcoin for $20,000 when it grows in price for only a couple of months, and another thing at $60,000, when the cryptocurrency cannot update its absolute maximum for a whole month but has been growing for more than a year.

From our point of view, Bitcoin will continue to lose popularity in the long term. This will be because retail investors are losing interest in the first cryptocurrency since it is already very expensive and most of the small investors simply cannot afford to buy a tangible amount of bitcoin. And not everyone wants to buy 0.00012654 bitcoin. Why, if there is Ethereum, which is also growing in price? Or Dogecoin, which is also growing very vigorously at the suggestion of Elon Musk?

In general, all this suggests that it will be more and more difficult for Bitcoin to show growth in the coming months and in 2021. Of course, no one is immune from the "Elon Musk factor". If tomorrow, for example, Bill Gates speaks up and announces that he has decided to give up charity and invest his capital in various useful startups, and instead bought a couple of billion bitcoins, then a huge number of new investors will flood into the cryptocurrency market, continuing to inflate it like a soap bubble. However, if nothing like this happens, we will still expect digital gold to consolidate below one of the important support levels of $56,000, $52,300, and $44,600.