As Bitcoin’s dominance rises, it could hint at a bullish wave of BTC price amid 2024 halving and geopolitical issues. We asked experts to get insights.
Bitcoin’s (BTC) dominance represents the proportion of the total cryptocurrency market capitalization that belongs to Bitcoin. It acts as an indicator that crypto traders can use to assess market conditions.
Recently, this dominance metric rose above the 50% mark once more, turning heads in the crypto community, especially with the anticipated 2024 halving.
To give you perspective, in January 2021, Bitcoin towered with an impressive 70% market dominance. However, by May, it faced a sharp decline, slipping to 40%. Numerous other cryptocurrencies achieved record highs as funds shifted from Bitcoin to altcoins.
From May 2021 to November 2022, Bitcoin’s dominance was between 38-40%. A notable shift in this narrative came after the FTX collapse, with Bitcoin once again asserting its dominance, now unwavering at a solid 50% as of Oct. 10.
So, what implications does this increased dominance hold for the crypto landscape? Heightened BTC dominance generally translates to more attention towards Bitcoin, especially amidst significant events such as the upcoming halving. Historically, such attention often leads to speculative behavior and potential price escalations.
Simply put, every halving event reduces the rewards for mining Bitcoin by half. This is a deliberate strategy to combat inflation. More often than not, the aftermath of a halving sees a significant uptick in Bitcoin’s value.
Rumors are rife in crypto circles regarding Bitcoin’s potential performance after this halving event. Some crypto pundits even foresee Bitcoin’s price soaring to a staggering $250,000 by April 2024.
As we stand at this pivotal juncture, let’s dive in and try to forecast the crypto market’s next big move.
A glimpse into past halving cycles
As we tread the timeline back to 2016 and 2020, the imprint of Bitcoin’s halving cycles on its market dominance and price behavior emerges clearly.
In the months leading up to the 2016 halving, Bitcoin’s dominance climbed from 80% to 90%, showcasing an inverse relation to altcoin growth. Post halving, as Bitcoin’s price surged, its dominance dipped to less than 80%, reflecting a fund shift towards altcoins.
Fast forward to 2020, the scenario mirrored past patterns but with heightened vigor. Bitcoin’s dominance was hovering around 55-60% pre-halving, and after the event, a price rally followed, pushing the dominance to a towering 69%. However, as Bitcoin’s price stabilized, funds diversified into altcoins, nudging the dominance to 56%.
The recent climb of Bitcoin’s dominance over 50% echoes the past. Since the beginning of this year, there’s been a notable shift, with Bitcoin’s dominance spiking nearly 10%, mirroring previous cycles where funds retracted from altcoins and rallied back to Bitcoin.
Bitcoin’s performance this year further underscores this point. It has clocked in an impressive 66% YTD gain, propelling its price from a bracket of $16-17k at the start of the year to a robust $27-28k by October.
The current dominance climb, mirroring patterns from 2016 and 2020, strongly hints at a bullish wave as 2024 looms.
However, Nitin Gaur, Head of Digital Asset & Technology Design at State Street, posits a different perspective on the upcoming BTC halving. Contrary to popular belief, he suggests that the impact of this halving might be subdued since it seems to be already priced in.
“This time, in my opinion, BTC halving will not mirror past cycles,” he notes. Some triggers that could potentially impact Bitcoin’s rise are geopolitical issues, energy equations, and the possible reduction in mining capacity due to decreased mining rewards and increased production costs.
What factors could trigger the next BTC bull run?
Approval of pending spot BTC applications
Various players are awaiting approval for spot BTC ETFs which, if approved, could potentially bring in a substantial amount of institutional money into the Bitcoin market, increasing its price and dominance.
This institutional engagement can act as a catalyst for Bitcoin’s bull run as it indicates a higher level of trust and acceptance among traditional financial players.
Economic shocks
Amid global economic challenges, including rising inflation, stagnant growth, and geopolitical tensions, Bitcoin’s decentralized nature has gained prominence as a potential safe haven.
As traditional markets waver, investors might increasingly turn to Bitcoin as a store of value, potentially driving its price and dominance upward.
Hype around the halving
The anticipation surrounding Bitcoin halvings has historically fueled significant bull runs. The hype often attracts many first-time participants to the crypto ecosystem, amplifying demand.
With the 2024 halving on the horizon, experts and industry leaders predict that this influx of new users, coupled with existing interest, could propel Bitcoin’s price further.
Global BTC adoption
Global adoption is on an upward trajectory, with over 420 million crypto users worldwide and an average global crypto ownership rate of 4.2% as of 2023.
Moreover, the adoption of Bitcoin as a legal tender in countries like El Salvador and predictions of more countries following suit indicate a growing global acceptance, which could contribute to a bull run in the lead-up to the 2024 halving.
Additionally, 2024 might witness political shifts and narratives around crypto-friendly regulation. Such changes could shape the demand side of the equation for Bitcoin and other cryptocurrencies. Nitin Gaur predicts:
“By the end of 2024, BTC should stabilize at the 45-50K mark due to the expected stability in global macro interest rates and the post-recessionary narrative of growth.”
The road ahead
From anticipated macroeconomic shifts and geopolitical tensions to the potential influence of political narratives favoring crypto-friendly regulations, numerous factors will mold Bitcoin’s trajectory.
Despite predictions, the exact outcome of the 2024 halving, be it a subdued effect or a significant price surge, will be fascinating to observe.
But as with all investments, especially in the unpredictable world of cryptocurrency, it’s essential to move forward cautiously. Enthusiasm is great, but remember always to trade safely. Never invest more than you’re willing to lose, no matter how promising the horizon looks.
