Bitcoin Dips as Dominance Over Ethereum Shrinks

Bitcoin is down about 4% in the past 24 hours along with stocks on Wednesday. The intraday sell-off occurred after the US Federal Reserve signaled a possible rate hike in March, which is closer than many had expected.

But despite the drop in price, some analysts expect bitcoin to stabilize in the $40K-$50K range, which could keep volatility low.

Others are eyeing alternative cryptocurrencies (altcoins) such as ETH, LINK, ICP and FTM that have outperformed BTC over the past week.

For example, some decentralized finance (DeFi) tokens that were no longer favored in early 2021 are still able to hold some of the highest positions in terms of total locked value, which is the number of assets that are stored in a protocol.

“Perhaps because it is considered a more battle-tested and safer store of capital than new competitors,” Delphi Digital wrote in a blog.

At the moment, even with altcoins in the spotlight, volatility in both BTC and ETH has been dropping lately.

“Our view is that this volatility pressure is structural and will be a theme for 2022,” cryptocurrency firm QCP Capital wrote in the Telegram announcement. “However, we believe that this drop is on the front end [of the volatility curve] It’s overly broad and we’re adding a long gamma here.”

Traders get a “Long Term Gamma Profit” when the underlying asset moves more than expected.

Latest Prices

  • Bitcoin (BTC): $43,943, -4.98%

  • Ether (ETH): $3,592, -5.85%

  • S&P 500: $4,700, -1.94%

  • Gold: $1,810, -0.19%

  • The 10-year Treasury yield closed at 1.69%.

Bitcoin dominance is waning

The bitcoin dominance ratio, or a measure of bitcoin’s market capitalization relative to the total cryptocurrency market capitalization, continued to drop around 39% on Wednesday. The ratio is at its lowest since April 2018, when the cryptocurrency was in a bear market.

Usually, during periods of market panic, some traders sell altcoins, which are considered risky. The option left for traders is to look for the relative safety of BTC, which leads to a higher percentage of Bitcoin dominance.

However, this time around, altcoins continue to outperform bitcoin, indicating that investors’ appetite for risk remains strong.

Bitcoin Dominance (TradingView)

Ethereum market cap is close to Bitcoin

Ethereum, the second largest cryptocurrency by market capitalization, is almost 50% away from overtaking Bitcoin as the largest cryptocurrency.

Some analysts are referring to the battle over cryptocurrency as “volatility.” Over the past year, ether has been gaining ground against bitcoin across many metrics, including active addresses, Google search interests, and the number of transactions.

ETH's market capitalization  s vs BTC (BlockchainCenter)

ETH Market Cap vs. BTC (BlockchainCenter)

The rise in the market cap of ether indicates that investors are looking for potential opportunities to get back beyond bitcoin.

“There are tough dates and a tough scheme from the Ethereum Foundation to increase network throughput and lower transaction fees,” Katie Talati, head of research at crypto and blockchain asset management firm Arca, said during an interview with CoinDesk’s “First Mover.”

The improvements of the Ethereum network could be a catalyst for attracting more funds to Ethereum versus Bitcoin, according to Talati.

Tour around Altcoin

  • Ethereum fee market condition: Edward Osterban of CoinDesk examined the motivation behind EIP 1559 and if there are any real impacts on the Ethereum blockchain four months later. So far, Coinbase has indicated that it delivers 27 ETH per day from basic fee refunds and transaction confirmations 11 seconds faster than it did before the London hard fork. On the other hand, Galaxy Digital’s look at EIP 1559 is reported due to increased block size (gas limits).

  • Chainlink (LINK) Jumped Out of Bitcoin: LINK has led gains among the major cryptocurrencies over the past two days as the broader market shows signs of recovery. LINK is used to pay for price feeds and other services on Chainlink and has a market capitalization of $12 billion, according to CoinGecko data. However, the price is down 50% from its record level of $52 last May.

  • Enters the Algorand metaverse: The Drone Racing Association (DRL) and Web 3 developer Playground Labs have harnessed the Algorand blockchain to create the first-ever playable drone game in the metaverse, the association announced Wednesday. While details are still being worked out, the association said that “players will be racing with DRLs” (presumably digital) to obtain cryptocurrencies and non-fungible tokens on Algorand. Read more here.

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Sector rankings are provided via Digital Asset Classification Standard (DACS)Developed by CoinDesk Indices to provide a reliable, comprehensive and standardized rating system for digital assets. the Queen desk 20 It is a ranking of the largest digital assets by volume on trusted exchanges.