A recent recovery in the crypto market has been heavily skewed towards Bitcoin (BTC), with the token now accounting for 47% of the market.
BTC jumped over 6% in the past 24 hours, reclaiming the $31,000 level. Focus is now on whether the token can hold on to these gains, given that it has stuck to around $30,000 for over a month.
The token holds a market capitalization of $599.2 billion, compared to a global crypto capitalization of $1.29 trillion.
But while BTC has somewhat held its ground, most other altcoins, barring Ethereum, have seen a drastic drop in value. This, coupled with the recent Terra crash, has pushed BTC dominance to levels last seen in July 2021.
Still, this level of BTC dominance may signal that a strong rally is on the way.
High BTC dominance precedes altcoin rally
As seen in July, high BTC dominance usually comes just before a strong rally. This can be clearly observed in October 2021, where after BTC dominance reached about 47%, the market shot up to record highs.
High BTC dominance usually indicates that the altcoin market is undervalued, attracting investors into the space. The buying then tends to spill over into BTC as well, boosting valuations all round.
But the macroeconomic scenario is currently different from that in 2021. The Federal Reserve has begun reducing liquidity in the market- a key factor for the stellar crypto rally over the past two years.
This may stall any potential attempts at a price gain.
Dominance is currently rising alongside alts, which is positive as it indicates they likely still have room to run. My macro sentiment remains largely bearish, however there’s a strong possibility we see an extended rally in the short term.
-Crypto analyst Miles Deutscher said on Twitter
Altcoin rally or dead cat bounce?
Despite their recent weakness, most top altcoins tracked BTC’s latest recovery.
But analysts warn that this could be another bull trap, given that the token has struggled to clear the $32,000 level for over a month. A drop in the token also causes broader losses.
Still, with U.S. stock markets set for a positive open this week, a short-term crypto rally could be on the cards.
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.