- Experts argue that Bitcoin dominance is on track to hit 60% and liquidity among altcoins is low.
- It is likely that altcoins get devalued on their Bitcoin pairs and bleed in the short-term.
- Benjamin Cowen, a technical expert argues some altcoins may survive the devaluation and stay strong, most may not.
Bitcoin dominance is currently in an uptrend and experts have predicted a run up to 60% in the short-term. Given low liquidity among most altcoins, technical analysts argue a “devaluation thesis” for most altcoin’s BTC pairs.
Bitcoin dominance on the rise, here’s what experts predict
Benjamin Cowen, CEO and founder of IntoTheCryptoverse commented on the rising dominance of the largest asset by market capitalization. Bitcoin dominance is currently at 47.7% based on data from TradingView.
The asset’s dominance is on the rise since November 27, 2022 and analysts have set a target of 60% for BTC dominance.
When Bitcoin dominance declines or recedes, it is a sign of capital rotation into altcoins. This narrative is termed “alt season” and crypto Twitter has speculated an alt season rally for weeks on end. If Bitcoin’s dominance keeps rising in accordance with Cowen’s thesis, an alt season may be distant for crypto market participants.
Liquidity in altcoins is low: What this means for alt season narrative
Trade volume in altcoins is considered a measure of the asset’s liquidity. Cowen argues that most alternative cryptocurrencies have low liquidity, alongside Bitcoin’s dominance this is a bearish sign for the alt season narrative.
Well my point is that I see #BTC dominance going to 60%. Altcoin liquidity is very low right now, so they can get devalued on their BTC pairs pretty quickly. I think ALTs will keep bleeding back to BTC for at least a few more months. Some ALTs can hold strong, but most will not.
— Benjamin Cowen (@intocryptoverse) April 9, 2023
This also implies that altcoins’ BTC pairs could get devalued quickly and capital could keep bleeding back to Bitcoin in the short-term.
Which altcoins can survive the devaluation thesis?
Liquid staking tokens
Top liquid staking tokens have captured market interest with the Ethereum Shanghai hard fork and token unlock less than two days away. Lido Staked Ether (STETH), Rocket Pool ETH (RETH), Frax Ether (FRXETH) have yielded between 3-5% gains for holders over the past week. With the liquid staking narrative gaining prominence and upcoming ETH token unlock, there is a likelihood of capital rotation in liquid staking tokens, fueling a rally in the short-term.
It is likely that the Shanghai hard fork is priced in, and in that case, the token unlock could turn out to be a non-event.
Avalanche ecosystem
In the past few months, Avalanche Labs has announced its partnerships with several major brands and giants like Amazon, shining the spotlight on its ecosystem’s tokens. Injective (INJ), GMX, Maker (MKR) and Sushi (SUSHI) have yielded nearly 5% gains for holders over the past week.
The above tokens are the top gainers of the Avalanche ecosystem and have witnessed price rallies in response to recent updates and announcements by the firm and their respective protocols. AVAX ecosystem tokens are likely to yield further gains if partnerships boost the utility of these tokens in the near future.
Cardano ecosystem
The Cardano ecosystem has nearly 8 million native tokens and over 4 million unique wallets. The ADA network’s growth exploded in the months following Ethereum’s Merge and the altcoin’s ecosystem tokens Chainlink (LINK) and Cardano (ADA) are on track to recover from their recent declines.
The ecosystem is likely to see further growth with the scaling solution Hydra’s launch.
