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Cryptocurrency : This is how the current market for bitcoin and altcoins resembles 2017, says Coin Metrics

Key facts:

In both cycles, bitcoin’s dominance fell within a month of their respective peaks.

Dogecoin had a similar pattern in this cycle to Ripple’s XRP in 2018.

After reaching a peak during the first quarter of this year, the dominance of bitcoin (BTC) in the cryptocurrency market fell to the levels of January 2018. The rise of dozens of altcoins, which were reaching high market capitalizations, gave rise to to this drop in the percentage of total market capitalization that corresponds to bitcoin.

A similar scenario occurred during the bull run in late 2017 and early 2018, when bitcoin first reached $ 20,000 per coin, according to data from this week’s report from the firm Coin Metrics, published on Tuesday, June 22.

The report is based on what Coin Metrics defines as the free floating supply, this is the liquidity of a cryptocurrency in the market, not the total supply of issued coins. The figure comes from the calculation of the currencies that are actually moving in the market, carried out by the same analysis company.

This week’s research draws a parallel between the two moments in the cryptocurrency market, during which a significant flow of capital from bitcoin to altcoins manifested, at the height of the price boom.

In both the past and most recent runs, bitcoin’s floating free supply-based dominance fell to the level of 40% or less, about a month after peaking, analysts note.

Fall in the dominance of bitcoin in the middle of the bull market. Source: Coin Metrics.

In both cases, the rise of new altcoins diverted some of BTC’s capital and distributed it among small-cap assets, many of which later became extinct.

Coin Metrics.

The highs and lows of the relationship between the capitalization of bitcoin and altcoins are very similar between the two market cycles described in the study, as the graph below shows:

Capitalization ratio between bitcoin and altcoins. Source: Coin Metrics.

Top altcoins during this cycle

During this market cycle, Coin Metrics highlights the rise in the prices of cryptocurrencies such as that of Ethereum, ether (ETH); Ripple (XRP), cardano (ADA) or Binance Coin (BNB). They also highlight the increase experienced by cryptocurrencies memes, with dogecoin (DOGE) as the maximum exponent and Shiba Inu (SHIB) following in their footsteps.

Analysts noted that the price surge of these coins caused an all-time high of market capitalization for altcoins, surpassing $ 1 trillion. Increases like these, the report adds, “attract retail investors and the attention of the mainstream media.”

Comparison between the market capitalization of the floating free supply between bitcoin and altcoins. Source: Coin Metrics.

The report points out as another interesting aspect the fact that ETH has barely managed to cover 45% of the total capitalization of altcoins at its highest point of this cycle, despite having set a new historical maximum of capitalization above 460,000 million of dollars.

If we review comparative data on market dominance over time, we find that, in the previous cycle, the still second cryptocurrency with the most value in the market reached a dominance peak of over 37%, according to CoinMarketCap records. On this occasion, it barely came close to 20%.

In this regard, analysts highlight a fundamental difference between both moments of the market. In the run of 2017 and 2018, ETH had moments of little correlation with BTC. Worse this time, both cryptocurrencies have gone up or down in tandem.

ETH maintains high correlation with BTC during this market cycle. Source: Coin Metrics.

Dogecoin and XRP vs. bitcoin

In 2018, Ripple’s cryptocurrency, XRP, played a major role in lifting an altcoin season, as the times when most of the major non-bitcoin cryptocurrencies outperform the latter in performance are known.

During that year, XRP reached around $ 200 billion in its floating free supply capitalization, approaching at its peak the maximum capitalization that bitcoin reached the previous December.

Although with its clear distances, the pattern that XRP experienced at that time has a simile in the behavior of DOGE during the current market cycle. The cryptocurrency meme barely exceeded $ 70 billion (less than a tenth of BTC’s peak of $ 900 billion)

Unlike ETH, both DOGE and XRP have had low correlation points with bitcoin so far this year. Even the cryptocurrency meme reached a correlation of 0 with respect to BTC a few weeks ago.

Correlation of XRP and DOGE with respect to bitcoin. Source: Coin Metrics.

End of the altseason in doors

The recent cryptocurrency market crash appears to be doing more damage to altcoins than bitcoin. Despite having lost about 50% of its price in a matter of two weeks and having broken the support of $ 30,000 this Tuesday, June 22, as reported by CriptoNoticias, bitcoin is catching up on the seasonal index of altcoins.

The “altcoin season index”, developed by the Blockchain Center, determines whether there is dominance of altcoins, based on the fact that more than 75% of the top 50 cryptocurrencies perform better than BTC within three months. Right now, 73% of them outperform BTC in that time.

Graph of the «altcoin season index» during the last year. Source: Blockchain Center.

However, if the comparison is restricted to just one month, there are barely 10% altcoins with better returns than bitcoin.

According to the most recent report from Glassnode, however, both BTC and the second largest cryptocurrency, ETH, show clear signs of weakness. The outlook does not look as promising as other analysts, who expect new all-time highs for the next few months.

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