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Increased Bitcoin Dominance Could Be a Positive Indicator

bitcoin dominance concept

Despite the cryptocurrency market suffering the worst correction since 2014, Bitcoin has increased its market dominance by over seven percent and reached a new three month high.

Back in May, Bitcoin only commanded 35 percent of the market but in the past two months that has risen to around 42 percent. At the time the market was in a corrective rally to previous support levels which now appear to be attracting new investors.

Since that time, however, a huge number of fruitless ICO’s have died out, prompting rattled investors to refocus their attention on the stability of crypto’s original currency. It’s not uncommon for the old stalwarts like Bitcoin and Ethereum to enjoy increased support during a bear market due the volatility affecting smaller digital assets and tokens.

Correlated Movements

The increase in the volume of major cryptocurrencies has reflected on the market, with significant positive movement in the past week. Additionally, the recovery has prompted an even more recent short-term rally amongst some smaller assets in the past few days.

Correlated movements in the cryptocurrency markets have kept Bitcoins dominance around 30 percent but during bear markets when smaller assets struggle, its dominance tends to increase. Minor movements by Bitcoin and Ethereum can often cause exaggerated movements of 10 or even 20 percent amongst smaller coins, which we are seeing now.

Usually at points like these when hundreds of small new tokens are being created every month, an improvement in the market dominance of Bitcoin is a strong indicator of an encroaching bull market.

Image From Shutterstock

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