Bitcoin Dominance Holding Back Altcoin Surge

Bitcoin's dominance (BTC.D) is a key indicator to monitor altcoin cycles. When BTC.D drops, it usually means investors are turning to

Bitcoin’s dominance (BTC.D) is a crucial indicator to keep an eye on when discussing altcoin cycles. Usually, when BTC.D drops, it signifies that investors are shifting towards altcoins during periods of market volatility.

However, despite macroeconomic worries such as the upcoming Federal Reserve meeting and “reciprocal tariffs” by Trump, Bitcoin’s dominance remains high. At the time of writing, it stands at 61.6%, which is lower than its February peak of 64.3%.

This week’s top gainers list features 4 medium to small-cap altcoins, which are becoming more attractive to investors over large-cap cryptocurrencies. This shift is evident as they are opting for riskier and cheaper options.

Bitcoin ETFs Impacting Capital Rotation

A significant factor contributing to this cycle is the emergence of Bitcoin ETFs. Just prior to Bitcoin reaching its all-time high of $109,000 in January, Bitcoin ETFs experienced inflows of $1.078 billion.

Since then, these ETFs have continued to receive millions of dollars in investments, concentrating capital in BTC and delaying the typical altcoin season, especially with liquidity remaining limited.

This delay in altseason is also being attributed to token dilution, with expert Virtual Bacon noting that altcoins usually surge later in the cycle.

“Many think the bull run is over as altcoins haven’t surged yet. But history shows altcoins tend to move later in the cycle, often well after Bitcoin’s rally.”

Currently, Virtual Bacon observes that “liquidity remains limited due to three major factors”:

Finally, altcoins might not pump until these factors are addressed, which could happen in Q3 2023 or at the latest in Q4 2023.

This anticipated turnaround could bring a peak in Bitcoin dominance around 70% in the liquidity zone, setting the stage for a strong kickoff to altseason during or after the summer.