Bitcoin Dominance Holding Back Altcoin Surge
Bitcoin’s dominance (BTC.D) is a key indicator to monitor altcoin cycles. When BTC.D drops, it usually means investors are turning to altcoins during market volatility.
However, despite macroeconomic concerns such as the upcoming Federal Reserve meeting and “reciprocal tariffs” by Trump, Bitcoin’s dominance remains high. At the time of writing, it stood at 61.6%, slightly below its February peak of 64.3%.
An interesting observation from the top gainers of the week revealed that 4 of them were medium to small-cap altcoins, indicating a shift towards riskier and cheaper options away from large-cap cryptocurrencies.
Bitcoin ETFs Impacting Capital Rotation
A key factor behind this cycle is the rise of Bitcoin ETFs. Just before Bitcoin hit its all-time high of $109,000 in January, Bitcoin ETFs saw $1.078 billion inflows.
Since then, millions have poured into these ETFs, locking up capital in BTC. This movement has delayed the typical altcoin season, especially as liquidity remains tight.
End of Altseason ?
As of March 18, over 12.88 million digital assets were listed on CoinMarketCap, up from 11 million in February. This surge, driven primarily by memecoins and low-cap tokens, is scattering investors’ focus.
While Bitcoin’s dominance remains strong, delaying the altcoin season, investors are turning to high-risk alternatives. Many tokens are now stuck with market caps ranging from $10,000 to $100,000, locking capital in short-term assets.
This pressure is impacting major high-cap cryptocurrencies. For example, the ETH/BTC pair, once robust, has now hit a five-year low.
While token dilution plays a part, expert Virtual Bacon believes this delay is also due to liquidity :
“Many think the bull run is over as altcoins haven’t surged yet. But history shows altcoins tend to move later in the cycle, often well after Bitcoin’s rally.”
Currently, according to him, “liquidity remains limited due to three major factors”:
- “The Fed continues to shrink its balance sheet through quantitative tightening (QT).”
- “The reverse repo facility is drained, removing a vital source of liquidity.”
- “The US Treasury’s general account is low on funds, meaning available funds are lesser.”
He concludes that altcoins may not skyrocket until these factors are addressed. He adds that this anticipated turnaround could happen in the third quarter of this year or at the latest by the fourth quarter.
In summary, the altseason might kick in during or after the summer once liquidity stabilizes. Additionally, Bitcoin dominance could potentially peak around 70% in the liquidity zone by then.
