In the last month, Bitcoin has been steadily going down, and in the last week and a half, its price has been extremely volatile. The price of many cryptocurrencies lowered on December 9 when China’s Evergrande Group was officially labelled a defaulter by Fitch Ratings. Shares also traded lower because stockbrokers were worried that China’s debt problems could cause a global downturn.
In the last month, experts have been struggling to analyze the dispersion of cryptocurrency returns. For instance, the BTC dominance ratio, which measures Bitcoin’s market share relative to the overall crypto market capitalization, reached its lowest value since September. The decrease in the Bitcoin dominance ratio suggests that alternative cryptocurrencies (altcoins) have been expanding more rapidly than Bitcoin in these last few months.
“Any sustained period when the share of BTC’s market cap fell below 40% was in January-March and April-June periods in 2018. After that, the BTC domination has recovered with altcoins’ deeper crash, called later the crypto winter,” said Alex Kuptsikevich, a financial analyst in the brokerage company FxPro.
The recovery of Bitcoin’s dominance is possible and might indicate a lower risk appetite among crypto investors.
Currently, experts continue to analyze the Bitcoin and stocks’ correlation because it can be an indicator of the speculation sentiment.
“As of recent weeks, Bitcoin has surfaced more like a risk asset – correlations against U.S. equities spike above 0.6 the past few days alongside the sell-off in technology stocks last Friday. However, crypto assets did not see the same rebound that U.S. equities had earlier this week,” Lennard Neo, head of research at a cryptocurrency investment firm Stack Funds, commented in his article on December 9.
During the sell-off at the end of November, investors withdrew 40 million U.S. dollars out of the crypto market. As a result, crypto fund inflows decreased and totalled 184 million U.S. dollars.
With the interest in Bitcoin declining, investors continue to invest in the crypto market opting for alternative cryptocurrencies. According to CoinShares, the inflows into Solana-based products reached 4.6 million U.S. dollars in one week despite the recent price volatility. For instance, Solana’s SOL token decreased by about 19% last week, while Bitcoin went down by 12% and Ethereum decreased by 5%.
Although many analysts try to persuade investors out of buying crypto, the community hopes that the market will continue to grow again as time passes. Optimistic experts expect the cost of Bitcoin to reach 100,000 U.S. dollars next year, and this is not at all impossible. By not making hasty decisions and holding their assets, in due time, investors might achieve quite impressive returns.