bitcoin (BTC) is rapidly regaining its lost dominance in the crypto market until 2023.
On January 30, Bitcoin accounted for 44.82% of the total crypto market capitalization, the highest since June. In September, the Bitcoin dominance index was as low as 38.84%.
The index typically increases when most cryptocurrency investors reduce their exposure to smaller tokens and seek safety in Bitcoin. Reasons include Bitcoin's better liquidity and lower volatility than alternative cryptocurrencies, or altcoins, mainly in a bear market.
Will Bitcoin's market dominance grow further?
As of January 31, Bitcoin is up 38% year to date to around $23,000. By comparison, the second largest cryptocurrency, Ether (ETH), gained 30% in the same period, showing that most investors are still gravitating towards Bitcoin so far in 2023.
From a technical perspective, the Bitcoin Dominance Index may rise further in the coming weeks as it recovers to its 50-week exponential moving average (the red wave on the chart below) for support.
If it does, the index could rise towards 48.5%, which has acted as resistance since May 2021.
On the other hand, the independent market analyst Rekt Capital go Bitcoin's dominance index rises towards 46%, which coincides with the upper trend line of a giant descending channel pattern, as shown in the monthly time frame chart below.
The short-term bullish scenario on the Bitcoin Dominance Index chart appears to be in line with a similar rally in the Bitcoin spot market, with bulls looking at a rise towards $25,000.
The force of #bitcoin on the 4 hour charts it is still impressive.
While the price action has been trending sideways for over a week, the short-term indicators (MACD, RSI) have reset once again…and are now rising.
Price will likely go up to ~$25k.
(Not investment advice) pic.twitter.com/QaPbNrxtxZ
—Dr Jeff Ross (@VailshireCap) January 29, 2023
Ethereum vs. Bitcoin, the main driver of BTC dominance
The bearish argument is that the Bitcoin Dominance Index may start to lose its bullish momentum after testing the resistance of its descending channel, as it had on several occasions in the recent past.
Related: Bitcoin sees most 2023 long selloffs as BTC $22.5K price tags
“Bitcoin Dominance is extending beyond the red in the monthly TF,” Rekt Capital noted, citing the index's horizontal trend line support near 44.11%. The analyst adds:
“A monthly close above the red could set up BTCDOM for another dip in the red that would benefit Altcoins.”
The above analysis comes as ETH eyes a possible bullish reversal against Bitcoin in the coming weeks.
In particular, the ETH/BTC pair has been consolidating near its support area (purple) within the 0.0676-0.0655 BTC range since January 24.
The ETH/BTC pair will likely see a rebound rally towards its (blackened) descending trendline resistance around 0.075 BTC if it continues to hold the support area. That, in turn, would reduce Bitcoin's dominance in the cryptocurrency market, as Ether's share would increase to 20%.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.
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