Bitcoin Dominance Growth Slows Down as ETH/BTC Nears Bottom

Bitcoin dominance, which measures BTC's share of the total crypto market, has steadily increased over the past several months, reflecting investors' preference for Bitcoin over altcoins.

Bitcoin’s price surged toward $66,000 in Oct. 2024 after breaking through key resistance levels earlier in the month.

Despite this price surge, the growth in Bitcoin’s dominance, currently over 58%, appears to have slowed down, raising questions about the strength of this rally and whether altcoins could regain ground in the coming weeks.

Bitcoin Dominance Growth Slows Down

Bitcoin dominance, which measures BTC’s share of the total crypto market, has steadily increased over the past several months, reflecting investors’ preference for Bitcoin over altcoins.

However, the BTC dominance dropped around Sept. 18, after which the metric started a downtrend.

The drop might indicate that the recent surge in Bitcoin’s market share is losing steam as traders diversify into other assets or hold back due to a lack of new market entrants. Bitcoin dominance continues to rise, but the growth has slowed down.

The slowdown can be attributed to several factors, including profit-taking among long-term BTC holders, as reflected in on-chain data, and the broader market uncertainty surrounding regulatory developments and macroeconomic concerns.

Additionally, some traders might be looking to hedge their positions by moving capital into altcoins, particularly Ethereum, as they anticipate potential short-term corrections in Bitcoin’s price. This shift creates resistance for BTC dominance to push higher, though it remains well above its key support levels.

Will ETH/BTC Finally Bottom Out?

The ETH BTC chart clearly shows Ethereum’s continued underperformance against Bitcoin, with the ratio slipping to around 0.039. This represents a sharp decline from previous highs, signaling that Bitcoin is outpacing Ethereum in market momentum.

Ethereum’s inability to hold ground against Bitcoin further strengthens BTC’s dominance in the short term, as capital flows out of ETH and other altcoins back into Bitcoin. The decline in the ETH BTC pair became more pronounced in July earlier this year.

However, the trend could reverse if Ethereum finds support at current levels and regains investor confidence, particularly with potential institutional interest in decentralized finance (DeFi) applications.

Should ETH/BTC start to rebound, it would likely cap Bitcoin dominance at current levels or even push it lower as Ethereum’s market share begins to recover. For now, the ETH BTC downtrend supports Bitcoin’s market dominance, with little sign of immediate reversal.

Bullish On-Chain Cues

Several on-chain metrics signal bullish cues for Bitcoin dominance in the coming weeks. One key chart is the Net Transfer Volume to/from Exchanges, which shows that more BTC is leaving exchanges than entering, indicating strong accumulation by long-term holders.

The reduction in exchange supply typically reduces selling pressure, supporting Bitcoin’s price and dominance.

Another bullish indicator comes from the Whale Deposits to Exchanges chart, where the volume of large transfers to exchanges has remained low. This suggests that whales holding significant amounts of BTC are not planning to sell soon.

Additionally, the size of whale transfer volumes has declined in Oct. 2024. The lack of whale-driven selling pressure could sustain the current BTC dominance and drive it higher if broader market sentiment is bullish.

Finally, large holders have steadily increased their positions, signaling continued confidence in Bitcoin’s long-term prospects.

Addresses with balances between 100 and 1,000 BTC have risen steadily. Moreover, the number of addresses with 1,000 to 10,000 BTC (blue) showed a spike recently. The whale accumulation trend further limits the available supply of BTC for trading, likely providing continued support for Bitcoin’s dominance, especially if new investors enter the market.

These on-chain signals suggest that while Bitcoin dominance has slowed, the long-term outlook remains bullish, particularly as large holders accumulate and reduce sell pressure. If market sentiment improves, these bullish cues could increase BTC dominance in the coming months.