Bitcoin (BTC) and the broader cryptocurrency market swung lower on Wednesday, as traders took profits following a sustained push higher during the previous session. With the bulk of the selloff concentrated in altcoins and tokens, bitcoin’s share of the overall market reached the highest level of the year.
Crypto Market Update
Despite falling almost 2% on Wednesday, bitcoin’s share of the overall cryptocurrency market rose sharply, reaching the highest level since December. The bitcoin price was last down 1.9% at $5,480.46, according to CoinMarketCap. The pullback followed a fresh six-month high on Tuesday that pushed bitcoin’s market cap closer to $100 billion.
Outside of bitcoin, all major altcoins and tokens reported declines midweek. Bitcoin cash (BCH) was among the biggest decliners, falling 8.2% to $277.16. EOS fell 8.4% to $4.89. The value of Litecoin (LTC) dropped almost 7% to $72.98. These large caps have given back a large chunk of their yearly gains as markets pulled back from extremely overbought levels.
Ethereum (ETH), the second-largest cryptocurrency by market cap, dropped 5.3% to $165.91. XRP was down 6.8% to test the psychologically significant $0.3000 level.
Since peaking around $185 billion on Tuesday, the total cryptocurrncy market cap has fallen to around $177.5 billion, according to the latest available data.
One of the most defining characteristics of the two-month uptrend in cryptocurrencies has been the strong relative performance of bitcoin compared to its peers. Since early March, the largest and most influential cryptocurrency has seen its share of the overall market strengthen from around half to 54.5%. As we observed last year, bitcoin’s dominance rate usually strengthens during bear cycles and declines during large market rallies.
The cryptocurrency market as a whole has recovered some $78 billion from the December low. A confluence of technical and fundamental forces have contributed to the rally, chief among them being the emergence of large-cap altcoins like Litecoin and Binance Coin. These assets have slowly escaped bitcoin’s immediate sphere of influence, which is a positive sign for the ecosystem as a whole (it means altcoins and tokens aren’t nearly as dependent on bitcoin as they were before).
That being said, long-term holders of bitcoin have likely realized that the largest cryptocurrency has been undervalued for quite some time and are using the present opportunity to increase their exposure while prices are still favorable.
The biggest example of this came late last month after a mysterious bitcoin whale purchased $100 million worth of BTC on three virtual exchanges, sparking a market-wide rally in virtual assets. Over the past four weeks, it has been confirmed with relative certainty that bitcoin has already entered a new four-year cycle, which means December likely marked the lowest of the lows we are going to see moving forward. Read more: Bitcoin’s Next Four-Year Cycle Has Already Begun; Here’s What Investors Can Expect.
Recognizing bitcoin’s current depressed value and its role as a leading store of value appears to have sparked renewed interest among investors and casual observers. Not only are Google searches for “bitcoin” increasing, capital flowing into virtual exchanges has also picked up significantly in recent months (this is true even if you don’t believe the volume numbers posted by CoinMarketCap).
Grayscale Investments, the cryptocurrency asset manager that created the bitcoin investment trust, also confirmed earlier this year that the bulk of its fourth-quarter inflows were concentrated in BTC. Between October and December, the Grayscale Bitcoin Trust brought in an average of $2 million per week compared with just $300,000 for all other assets.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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