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Bitcoin is on a tear, but not all cryptocurrencies are booming
KEY POINTS
- Bitcoin price surpassed $35,000 for the first time since May 2022, as market speculators anticipate the imminent approval of a spot bitcoin ETF in the US
- Over the past three days, more than $250 million in bitcoin short positions have been liquidated.
- According to Deutsche Digital Assets head of research André Dragosch, a short compression has been a key factor contributing to the recent rise in bitcoin prices.
- The Bitcoin Dominance Index calculated by TradingView also reached 54.26%, the highest level since April 2021.
- As Bitcoin’s dominance of the cryptocurrency market increases, a report from Kaiko indicates that deletions of crypto assets from exchanges are happening at the fastest pace in history.
Bitcoin’s price briefly rose above the $35,000 mark this week, and some analysts believe the growing participation of small investors could bode well in the coming weeks, but the cryptocurrency’s rise hasn’t helped the rest of the market.
Trading related to the news of a potential approval of a spot bitcoin exchange-traded fund (ETF) escalated, pushing the price above $30,000 and squeezing short positions, according to Deutsche Digital Assets head of research André Dragosch. THE short compression has led to the liquidation of more than $250 million in short positions over the past three days, according to Coinglass data.
At the same time, the Bitcoin Dominance Index (BDI), a measure of bitcoin’s share of the overall cryptocurrency market, reached levels not seen since April 2021.
Bitcoin dominance index at highest levels in two years
While a rising bitcoin tends to lift all crypto assets, the rest of the market has not been able to keep up with bitcoin this week. In fact, this has been the trend for almost a year, as the BDI has seen a steady increase ever since collapse of the FTX cryptocurrency exchange in November 2022. Today, the BDI stands at approximately 54.4%, the highest level since April 2021.
TradingView
Indeed, the darlings of the previous cryptocurrency bull market have not fared well compared to bitcoin over the past year. For example, Ethereum’s native crypto asset, ether, is up just 14% over the past year compared to a gain of about 66% for bitcoin.
At the same time, Bloomberg reported that, according to data from Kaiko, crypto tokens are being removed from exchanges at a rate never seen before in the history of the industry. Nearly 3,500 crypto token delistings have already taken place or are expected to take place in 2023, and Coinbase (CURRENCY), which is he is currently being sued by the U.S. Securities and Exchange Commissionit is said to have removed 80 trading pairs this month alone.
Small Investors Laying the Groundwork for the Bitcoin Bull Market?
Dragosch observed an increase in bitcoin wallet activity for both small and large investors, but there was one number that stood out. An increase in the “median value of transfer volumes on the Bitcoin blockchain,” an indicator of small investor participation, could hold some clues about the direction of bitcoin’s price.
“The participation of small investors is a necessary condition for a sustained bull market in cryptocurrencies,” Dragosch wrote.