A “healthier distribution” of the market is upon us, as a result of an eventual decline in Bitcoin (BTC) dominance and an altcoin bull run, estimated token data and rating agency TokenInsight.
The agency published their 2019 cryptocurrency annual report, writing that the 2020 crypto market as a whole will see a stronger move, and this will be combined with a number of halvings events, “solidifying the market foundation for a bull market.” Specifically, Bitcoin’s upcoming mining reward halving in May is likely to have a limited impact on its price in the short term but will have a positive long-term effect.
Altcoins’ 2019 was a year of fast growth, says TokenInsight, but BTC dominates the market nonetheless. However, “Bitcoin dominance will see a reasonable decline followed by an [altcoins] bull run to distribute the market in a more healthy way,” they write.
This year, Bitcoin dominance, or the percentage of the total market capitalization, dropped by more than 4 percentage points and is below 63% today.
As to the origin of this bull run, it’s main drivers, as well as sustainability, the agency’s senior analyst, Johnson Xu, agreed that it’s “mostly true” that most market participants discuss Bitcoin primarily or only. However, Xu said, given that there has been a “significant interest” from the institutional investors for Bitcoin and Ethereum (ETH), TokenInsight estimates that this “will gradually translate into a higher interest on altcoins,” albeit somewhat limited.
When Bitcoin’s in a bull run, there’s a high correlation between it and altcoins. However, it’s not realistic that BTC’s dominance will be infinitely increasing, meaning, it has to drop at some point to distribute the BTC profit to drive altcoins run. Therefore, said Xu, the altcoins bull run will simply be a healthy market distribution.
Later, once a bull trend in the market starts, if there’s a major rise in BTC’s price at the beginning of that bullish period, retail investors will start to FOMO (fear of missing out) into the space, said Xu. And at that point, while some will buy BTC, others will focus on altcoins as they are more affordable, and their knowledge of the new market’s inner-workings is limited. However, it’s these retail investors that will drive the bull run at some point.
As a matter of fact, added Xu, according to the data from the options market, the market is very bullish right now.
Also, the report presented a number of other insights, including that:
- compared to 2018, Ethereum’s price and network hash rate are lower and more stable, and its scaling solutions are effective with their development progress being apparent in 2019;
- several newly launched altcoins in 2019 ranked in top 50 cryptocurrencies by market capitalization, these being LEO (LEO Token), ATOM (Cosmos), HEDG (HedgeTrade), ALGO (Algorand), and FTT (FTX Token);
- most altcoins performed a positive average daily return in 2019, among which, the average daily return of HEDG is the highest compared with other top altcoins.
At the moment (10:55 UTC), BTC is trading at USD 9,826. It almost unchanged in the past 24 hours and appreciated 7% in a week. The second by market capitalization, ETH, is trading at USD 222, having appreciated 0.7% in a day and 19% in a week.
Meanwhile, we recently discussed a Bloomberg Intelligence report that found that the optimism surrounding recent rallies is more sustainable in Bitcoin than the broader crypto market. In a January’s report, TokenInsigt wrote that, if the major digital assets, BTC included, can’t prompt another bull market in 2020, exchange-based tokens may decline due to the possible trading volume shrinkage.
Chris Burniske, partner at the crypto-focused venture capital firm Placeholder, also shared his forecast: