Altcoins shoot higher, bitcoin stagnates – analyst warns of possible crash
Traders in the Bitcoin market are currently looking for opportunities in rival crypto assets.
The „Bitcoin Dominance Index“, which compares the market capitalisation of the flagship cryptocurrency with the rest of the crypto market, fell to its two-month low on Friday. The index’s downward move appeared as traders pumped up the altcoin market by as much as $25 billion, generating another record high for Ethereum.
In comparison, Bitcoin pulled in around $14.77 billion over the same period.
The „Bitcoin Dominance Index“ fell through previous support levels. Source: BTC.D on TradingView.com
The recent capital shift occurred when Bitcoin failed to hold above $38,000 for the third time in less than a month.
Many traders expected a broader price move towards $40,000, with a primary upside target lurking at the previous record high at $42,000. Nonetheless, a stronger US dollar and the prospect of a Bitcoin Supreme faster recovery in the US economy kept safe-haven demand subdued, limiting Bitcoin’s gains (Go to Buy Bitcoins with Instant Bank Transfer Guide).
The BTC/USD exchange rate slipped below $38,000 and formed intraday lows near $36,000, and its flat structure prompted traders to look elsewhere for opportunities, leading to massive short-term pumps across the altcoin market.
DeFi booms
The biggest beneficiary was the decentralised financial sector.
Almost every top DeFi token benefited from Bitcoin’s stagnation in the last 24 hours. These included AAVE, a decentralised lending platform, whose eponymous token jumped 19 per cent, and Maker, a permissionless lending platform responsible for creating the stablecoin DAI, whose token MKR rose 35 per cent.
Other DeFi tokens with wild rallies include Chainlinks LINK (+11.56%), Synthetixs SNX (+14.60%), and Compounds COMP (+20%).
Data provided by DeFi Pulse shows an increase in total value completed across DeFi pools. It reached a record peak of $33,549 billion this Friday – confirming that more traders have locked their crypto assets into the smart contracts to seek attractive short-term returns.
Most of these liquidity pools allow users to deposit altcoins that operate outside of DeFi’s scope. This includes Ethereum’s ETH, which recently hit an all-time high after its influx into DeFi pools caused a supply crunch on spot exchanges.
The token rose 1.67 per cent on Friday.
Other traditional altcoins also rose, with Ripple’s controversial token XRP up 15 percent and Cardano’s ADA up 18 percent.
Will a crash follow?
The higher valuations in the altcoin markets sparked fears of a possible dump among some analysts. For example, bitcoin evangelist Vijay Boyapati warned of a 2018-like scenario.
Back then, an aggressive bull run in the cryptocurrency market later led to a capitalisation decline of more than 95 per cent.
„Many altcoins from previous cycles have gone to zero,“ says the ‚Bullish Case for Bitcoin‘ author. And:
„I think most in this cycle will too. Maybe not all, but in the long run the relative market cap to Bitcoin will fall back to something small. It always goes up with the speculative fervour and the dumb money that comes in.“
Meanwhile, Erik Voorhees, chief executive at ShapeShift, explains that all cryptocurrencies are trading higher because „the whole industry is growing together, and it’s not mutually exclusive.“