Bitcoin Dominance during a Bearish Market

This article reviews Bitcoin the concept of dominance in crypto. Bitcoin dominance is a very important pillar during bearish times. In this article we dive deeper into de-risking and macro setups.

Dominance Review

For a brief introduction to Bitcoin dominance, check out our earlier writing [here]. Bitcoin dominance is an important concept because it shows the total strength of Bitcoin compared to the rest of the market, every crypto asset is included. If the total market cap of crypto assets were valued at 2 trillion dollars and BTC held a 50% dominance, the market cap of BTC would be 1 trillion dollars. But why is this important?

When the crypto markets are expressing extreme fear, they behave similar to the traditional markets. Investors look to de-risk by reducing speculative bets, in traditional markets Bitcoin is definitely a speculative bet, but for crypto it’s the safer play. As markets take a downturn, investors look to take profit into Bitcoin and or stable coins. This combination reduces risk because Bitcoin usually falls far less than altcoins. Remember, altcoins are all crypto assets aside from Bitcoin and Ethereum.

As the total market cap dropped these past 3 months, the dominance for Bitcoin expressed as a percentage increased. Although Bitcoin’s value dropped, more of the total crypto market was being allocated to Bitcoin than other crypto investments. Many investors exited their positions for what profit they could muster; many took losses as well. With the increase in stable coin reserves, this provided buying power to average back into Bitcoin on the dip. Bitcoin sits today at a strong support around the 30,000$ mark.

Bitcoin dominance bear market
Bitcoin Dominance

Dominance During a Bear Market

So it is now clear that we are in a bear market for Bitcoin. BTC broke its record for most consecutive weeks in a row expressing negative price action[1]. The amazing thing is that BTC only lost 22% during these 9 long weeks, and to think that it sits at 30k on the lows is even more amazing. For those who have been reading for a while, you will know that MoC and myself are true altcoiners.

We love to try to outperform BTC and Ethereum with every investment we make. The problem with going too hard into altcoins during a bear market is that they can continue to bleed heavily making it hard to average in a good cost basis.

Perhaps a better strategy would be to either focus efforts purely on BTC, or at least heavily reduce altcoin allocations for the time being. The reason for this is that BTC is likely to retain your purchasing power for the long-term, many altcoins will die during this bear market. Traders can then flip BTC into their favorite altcoins as BTC recovers. I am choosing to continue to average into few altcoins, namely AVAX and FTM, but my bigger buys are in BTC for the next few months.

As this strategy unfolds, I can take Bitcoin profit into AVAX or FTM, or one of my various researched altcoins. The main thing to avoid right now would be speculative micro market cap tokens. MoC and I do continue to average into very small projects like JOE on Avalanche, FOREX on Ethereum, and EQUAL on Fantom. We do however “ape” far less than we used to. We also use our passive income for these buys, rarely fiat(cash directly from bank account). My fiat on ramps are going about 50% into Bitcoin at this time, a strategy I rarely employ.

Part of this is because there really aren’t any stocks I can think of that I have a great 10-year outlook on. Certainly, an investor could average into mutual funds, or blue chips and make some level of return. But I remain confident that Bitcoin will once again outperform the stock-market when this bear market/recession reverses. After all, those who have the conviction to average into their strong fundamental bets will make it for the long-term.

Bitcoin dominance ethereum chart
Bitcoin Dominance and Eth/BTC Trading View

Bitcoin & Purchasing Power

One of the strongest macro setups we have is to retain our purchasing power by averaging into Bitcoin. Sure, BTC remains highly volatile, but how often are we accessing our savings or rainy-day accounts in the first place. Every green year Bitcoin has had, investors wish they bought more of the asset class, myself included. As the dollar weakens, BTC becomes more appealing.

With inflation so rampant, many assets will not retain purchasing power. The price of every day commodities is sky rocketing, making life very hard for the average citizen in any country. The US dollar has resisted inflation better than most of the forex (various national currencies) market. But inflation is destroying the American economy alongside other countries with weaker dollars.

Have you been to the grocery store lately, or purchased gas/other fuels? 100$ in Bitcoin today will certainly buy far more than 100$ of cash 2 years from now. Then again who wants to spend their BTC? I certainly have no plans on buying things with my Bitcoin. BTC as a currency is now effective thanks to the lightning network but I prefer to treat it as a long-term store of value. Now if you have felt the pain of the altcoin decimation these past few months I feel you. Selling at these levels is likely not the best idea unless you do it for tax harvesting.

A strategy I employed during this crash was to take my most speculative altcoins and flip them into my selected winning layer-1s for next year (end of 2023-Mid 2024). I then took what profit I had on the rest into stable-coins to dollar-cost average BTC. If you timed the discount phase of BTC/ETH in April 2021, you would have made a pretty penny.

Above is a chart showing even ETH bleeds against BTC, this is another reminder that BTC is the safest option for non-professionals. However, if you have a long-term mindset buying the dips on any of the strong fundamental crypto assets will likely pay off on the monthly/yearly timeframe. Please remember none of this is financial advice, please stay safe out there!

Patrick O’Neil

About Patrick O’Neil


Patrick is an avid technology and gaming enthusiast. Patrick taught himself how to assemble computers in 2010 and was always fascinated with the gaming market. In 2019 he decided to sell his grayscale Ethereum funds and dive into the world of crypto firsthand. 

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