Bitcoin's dominance has declined the most in 3 years. Is there an altcoin season ahead?

Bitcoin's dominance in the crypto market has dramatically weakened - over the week, its share fell by 5.8%, dropping below 61%. This is the lowest level since March. Against the background of slowing growth in the price of the most popular cryptocurrency, capital began to flow more actively into altcoins, in particular Ethereum, Dogecoin and Solana, which show double-digit weekly returns. The weakening correlation between bitcoin and other tokens, along with institutional interest and positive regulatory developments, indicates the possible start of a new cycle of altcoin growth.

Bitcoin's share of the cryptocurrency market fell 5.8% in a week, dropping below 61%, drew the attention of industry publication CoinDesk. By its calculations, this is the largest weekly decline in nearly three years - since June 2022. Bitcoin now has its smallest lead since March, according to data from TradingView. Back in late June, its share was as high as nearly 66%.

Bitcoin was up 0.2% on Monday, July 21, trading around $119k at the time this text was published - slightly higher than a week ago. Ethereum was up 0.5% on the day and 27% on the week, thanks to strong demand for new Treasury products based on these tokens and continued inflows into ether ETFs, analysts explained;

Dogecoin jumped 10% on July 21, with a weekly gain of more than 33%. Other coins such as XRP, Solana and Cardano are also appreciating faster than bitcoin. 

Bitcoin's shrinking market share means that it is more profitable for investors to invest in other currencies, CoinDesk explains. The positive correlation between the dynamics of bitcoin and altcoins has noticeably weakened - in other words, altcoins no longer follow the movements of bitcoin, the publication points out. This pattern, according to research by analytics platform Alphractal, has often preceded increased volatility and forced liquidation of margin positions in the past.

"Over the past week, altcoins have started to come to the forefront as bitcoin has stalled just below its recent all-time highs and capital is flowing into a wider range of crypto assets," said Emanuel Cardoso, a market analyst at Brickken, an asset tokenization firm. He saw this as an early sign of the start of the altcoin season, and believes the next wave of growth could be led by altcoins linked to the real economy.

Alternative coins are also undermined by the so-called phenomenon of unit bias - bias toward whole units, CoinDesk writes. This is a cognitive distortion in which investors prefer to own whole units of an asset instead of a fraction, even if in absolute terms their value is the same. While the bitcoin price has been updating record after record, less experienced market participants have been shifting to cheaper tokens, especially memcoins, the publication notes. 

The total market capitalization of cryptocurrencies increased from $3 trillion to $4 trillion in three weeks, with altcoins such as Ethereum being the main drivers of growth. 

"Ethereum and other altcoins are rising thanks to institutional demand and favorable legislative policies. Traders are hopeful that Ethereum will break all-time highs, remaining the only major asset that has yet to do so in the current cycle," said Eugene Cheung, chief commercial officer at OSL.

US President Donald Trump signed legislation last week that creates a regulatory framework for stablecoins - tokens pegged to the dollar. This should legitimize a $265 billion market that Citigroup analysts predict could grow to $3.7 trillion by 2030. 

This article was AI-translated and verified by a human editor