The cryptocurrency landscape has seen major changes over the last few months, with Bitcoin taking the lead in terms of market dominance. According to CoinGecko’s report, other altcoins have “bled” as Bitcoin has gained dominace in the second quarter of 2020. This article will explore the impact this has had on the market and the reasons driving this trend.
I. Altcoin Performance Takes a Big Hit in Q2
Investors in the cryptocurrency market had great hopes for the performance of Altcoins in the second quarter of 2020, yet their hopes were unsuccessful. In the following paragraphs, we will review the causes of this market trend, its effects, and also some of the ways investors may approach the situation going forward.
The main cause of the decreased performance of Altcoins can be primarily attributed to the heavy losses suffered in Bitcoin. The world’s largest cryptocurrency saw a significant drop of 46% from its year-to-date highs, and nearly all Altcoins followed suit. Unsurprisingly, tokens in the DeFi space were hit the hardest, after the sector’s peak prices fell by 85%. Covid-19-related disruptions in the economy, negative investor sentiment, and the great uncertainty surrounding the halving event are some of the main drivers of this retraction in Altcoin prices.
The primary effects of this trend have been felt by a large number of investors who were late entering the cryptocurrency market in the past year. Those that had already generated profits from their Altcoin investments saw their gains impaired drastically or wiped out completely. Furthermore, the high levels of volatility experienced in Q2 have caused the entire cryptocurrency market to turn volatile, so current or aspiring investors should take special care when entering the crypto lanes.
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- Stabilize Your Portfolio: To mitigate the risk of their current capital holdings, investors should reposition their portfolios to become less Altcoin-heavy and more Bitcoin-heavy until the market recovers.
- Practice Patience: Do your research before making any cryptocurrency purchases, and be patient. Although the past quarter has felt like a deep dive, there is still potential for Altcoins and the market as a whole that is yet to be explored.
- Pattern Recognition: Familiarize yourself with the typical movements of the Altcoin and Bitcoin markets and look out for signs of a new uptrend. This can be a powerful tool for reclaiming profits.
II. Bitcoin Dominance on the Rise Despite Disputes
Bitcoin has managed to consistently lead in market capitalization. According to recent data from Coinmarketcap, Bitcoin’s market share has been steadily increasing, reaching nearly 68%. This is an impressive display of the strength of Bitcoin in the cryptocurrency industry, despite ongoing disputes and biases against Bitcoin and other cryptocurrencies.
These increasing market capitalization numbers are being driven by a few factors. Firstly, there has been an increasing diversification of investments amongst new Bitcoin investors. With Bitcoin giving new investors an easy and secure way to store and transfer money, its popularity continues to grow and increases its dominance in the crypto space.
- New investors have led to an increased market capitalization for Bitcoin
- Demand for Bitcoin has grown, increasing its market share
- A secure infrastructure surrounding Bitcoin has lead to an increase in its market capitalization
The second factor contributing to Bitcoin’s dominance is its secure infrastructure. Over the past few years, Bitcoin has been able to establish itself as a secure and reliable form of digital currency. This has allowed investors to feel comfortable investing in Bitcoin, and this has caused a surge in its price and market capitalization.
III. All Eyes on Bitcoin as it Increases its Share of the Market
Bitcoin continues to command an outsized market share despite its wild price fluctuations and shortfalls of traditional currency. In its current state, Bitcoin now holds more than 40-50% of the crypto-currency market share, and is likely to keep growing given its popularity among investors.
Increased demand for Bitcoin is also a factor driving its share of the crypto-currency market higher. In the past month alone, institutional investors have plowed money into Bitcoin, resulting in the coin’s market share reaching the highest level since January 2018. This trend appears set to continue as institutional investors rush to get in on the ground floor.
Other coins have failed to make inroads into Bitcoin’s share of the market, with Ethereum, Bitcoin Cash and Litecoin manifesting only short-term gains. This is largely due to Bitcoin’s superior market liquidity, as well as its strong influence on prices of other coins.
What this means for investors:
- Bitcoin is likely to remain the dominant coin in the crypto-currency market for the foreseeable future.
- Investors should consider diversifying their portfolios by introducing other coins to their investments.
- Strong predictions of further gains in Bitcoin will drive its market share higher.
IV. What’s Next for the Altcoin Market?
The future of the altcoin market is uncertain. On the one hand, speculation around altcoins remain strong, and the increasing number of cryptocurrency exchanges provides a necessary boost in liquidity. On the other hand, cryptocurrency regulation remains a major obstacle and expensive bear markets have caused some traders to abandon the market altogether.
In the short-term, a few trends are emerging in the altcoin market. The advantages presented by decentralized finance have been gaining traction, with large injections of capital and an explosion of new DEFI-backed tokens arriving on the scene. Competition between exchanges is also increasing, introducing new features, lower fees, and faster trading cycles.
In the long-term, the altcoin market is likely to remain volatile. Governments and regulators are seeking to gain control of the market as its popularity increases, potentially introducing new rules or outright bans in certain countries. However, it is clear that the altcoin market will play an important role in the future of cryptocurrency – whether as a means of speculation or a way to access more obscure tokens with interesting use cases.
The continuation of Bitcoin’s growth in the second quarter of the year has solidified its status as the dominant cryptocurrency. Altcoins have been the victims of Bitcoin’s strength, with many of them seeing significant losses in market cap and value. For investors looking to invest in the cryptocurrency market, the importance of Bitcoin’s progress can’t be understated.