Key Points
- Bitcoin’s dominance in the crypto market may have peaked, according to analyst Michaël van de Poppe, potentially signalling a rise for altcoins.
- On-chain data suggests a weakening demand for Bitcoin, with a potential further downside in its price.
Bitcoin, the world’s most significant cryptocurrency, has experienced substantial selling pressure, extending its weekly losses to over 10%.
Following the FOMC meeting on May 1, Bitcoin’s price fell a further 5%, dropping to lows of $56,500, before partially recovering. Michaël van de Poppe, a well-known crypto analyst, recently suggested that Bitcoin’s dominance may have already reached its peak, and it could be time for altcoins to shine.
Altcoins Gaining Ground?
Typically, a decrease in Bitcoin’s market dominance indicates a potential altcoin market rally, as investors move their capital from Bitcoin to altcoins. Given the vast size of Bitcoin’s market cap, its current market dominance stands at approximately 53.9%. This figure is after a 1.75% drop in dominance over the last week. However, Bitcoin’s dominance in the broader crypto market has increased by over 4.6% since the start of 2024.
Several market analysts have highlighted the recent drop in Bitcoin’s dominance. Crypto trader Matthew Hyland noted a significant loss of support in Bitcoin’s dominance and expressed his intention to wait for the weekly close before confirming or negating ‘the breakdown’.
On May 1, trading team IncomeSharks observed that Bitcoin’s dominance is declining, suggesting potential for altcoins to capitalize if price fluctuations persist for several months. They also highlighted the unexpected resilience of many altcoins that day.
Weakness in Bitcoin Demand?
Bitcoin’s price has faced a severe correction under $60,000. On-chain data shows a slowdown in Bitcoin demand growth along with a surge in short positions. This data suggests that further downside in Bitcoin’s price cannot be ruled out.
CryptoQuant’s report attributes Bitcoin’s recent decline to a reduction in demand, marked by a slowdown in the growth of Bitcoin balances among long-term holders, decreased interest in spot Bitcoin ETFs, and a rise in short positions in the futures market.
CryptoQuant’s data indicates that demand from long-term holders, defined as investors who consistently accumulate Bitcoin without selling, decreased by 50% in April. Balances went from over 200,000 BTC in late March to approximately 90,000 BTC.
In contrast, the demand from Bitcoin whales has also been declining since March. CryptoQuant notes: “Bitcoin whale demand growth (purple area) peaked at a monthly growth rate of 12% in late March and has now slowed down to 6%.”
According to renowned analyst Scott Melker, the Bitcoin price is unlikely to fall below $52,000 in the short term. Despite the correction, which he considers relatively minor for a bull market, the daily Relative Strength Index (RSI) has not yet reached oversold levels.
“This is still only a 23% correction, very shallow for a bull market and consistent with other corrections on this run. We are yet to see a 30-40% pullback during this bull market, like those of the past,” he commented.
