Bitcoin’s market dominance grows, sustained by the long-term support of incumbents

After the cycle low of November 2022, capital has gradually shifted to the major cryptocurrencies at the top of the digital asset risk curve.

Bitcoin, for example, has seen its dominance expand once again as a certain cohort of holders continued to support growth. However, the same cannot be said for other crypto assets.

Bitcoin strengthens market dominance

According to Glassnode’s latest report, Bitcoin’s dominance has increased from 38% in November 2022 to a remarkable 56% of the entire digital asset market today.

On the other hand, Ethereum, as the second largest asset in the ecosystem, has seen a decline in dominance of 1.5%, remaining virtually unchanged over the past two years. Stablecoins and the broader altcoin sector have witnessed more significant declines of 9.9% and 5.9%, respectively.

Despite the recent market turbulence, long-term holders have consistently made about $138 million in daily profits. Glassnode found that the $138 million in daily selling pressure from this particular cohort of Bitcoin investors likely reflects the amount of capital needed each day to absorb that supply and keep prices stable.

While market conditions have been volatile, the report says “prices have been broadly flat over the past few months, suggesting some form of equilibrium is being reached.”

Interestingly, the supply of long-term holders is increasing rapidly and the data suggests that this trend highlights that HODLing behavior is far outstripping spending. However, it is the short-term holders that have faced the brunt of the losses during the recent recession.

Short-term investors caused an “overreaction.”

Bitcoin may have recovered to $60,000, but Glassnode said its more than 15% drop to a six-month low of $49,500 in the first week of August was caused by a “overreaction” by short-term holders. Many of these investors, defined as those holding BTC for less than 155 days, who bought during the 2024 rally are currently facing unrealized losses.

Therefore, the MVRV ratio of these investors has fallen below 1.0, indicating that they are largely responsible for the losses after the market correction.

Meanwhile, the report further stated that the impact on investor sentiment may not be as severe as it might first appear.

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