- Bitcoin dominance fuels market growth, leaving altcoins behind since 2021.
- ADI downtrend highlights lack of breadth, with Bitcoin driving the market’s rally.
- Resumption of QE could shift dominance, broadening capital distribution across crypto.
The cryptocurrency market has seen impressive growth, especially in 2023 and 2024, but the underlying market breadth has been weakening. While total market capitalization continues to rise, a significant divergence exists between the performance of the top cryptocurrencies and the broader market.
This trend is particularly evident in the Advance Decline Index (ADI) for the top 100 cryptocurrencies, which has been in a steady decline since 2021 as highlighted by Benjamin Cowen, Founder ITC_Crypto. Consequently, most altcoins have either stagnated or declined, highlighting a lack of market participation outside of Bitcoin.
Divergence Between Market Cap and ADI
A clear contrast can be observed between the growth in total market capitalization and the ADI’s persistent downtrend. The total market cap of cryptocurrencies has recovered and even grown since late 2023.
However, the ADI has remained on a downward trajectory, signaling that market gains are not broadly distributed. This indicates that a handful of cryptocurrencies, predominantly Bitcoin, are driving the market’s growth, while many others continue to face difficulties. This lack of breadth raises concerns about the sustainability of the current market rally.
Bitcoin Dominance and Its Impact on Altcoins
The dominance of Bitcoin in the market has been a critical factor in shaping this trend. During times of economic uncertainty or monetary tightening, Bitcoin tends to capture the lion’s share of market inflows.
As a result, altcoins suffer from reduced liquidity and attention, further depressing their performance. Bitcoin’s dominance is also linked to the ongoing downtrend in the ADI, as funds flow into Bitcoin rather than alternative cryptocurrencies.
Historically, this pattern has only reversed when liquidity from quantitative easing (QE) entered the market, supporting a more even distribution of capital across various cryptocurrencies.
The key factor that could alter the current trend is the potential for quantitative easing (QE) to resume. In previous market cycles, QE provided the necessary liquidity that allowed altcoins to gain momentum and reversed Bitcoin’s dominance. Without the stimulus from QE, the broader market will likely continue to struggle, and a true recovery in the ADI remains unlikely unless macroeconomic conditions shift.
Bitcoin Dominance: Support and Resistance Levels
Bitcoin dominance has shown resilience, especially after finding support around the 4.0-4.2% range in 2022. In 2023 and 2024, dominance saw a clear recovery, reaching higher levels as Bitcoin outperformed altcoins. The key support levels to watch for Bitcoin dominance include the 5.3-5.4% range, which marks significant EMA support.
If dominance holds above this zone, it could continue to trend upward, potentially testing resistance levels around 6.0% or higher. However, if dominance falls below 5.3%, the market could see altcoins gaining ground, and Bitcoin may lose some of its lead.
