The Declining Market Share of Altcoins: Investors Shift Towards Bitcoin, Ethereum, and Stablecoins
Altcoins are getting hit hard
Last week, the US Security and Exchange Commission (SEC) sued exchanges Binance and Coinbase. This legal action had significant consequences for the altcoin market. Many altcoins experienced substantial losses in value. For instance, cardano (ADA) dropped by over 22 percent, while solana (SOL) plunged by 25 percent.
The impact of SEC labeling altcoins as securities
The SEC’s classification of certain altcoins as securities negatively impacted their prices. This regulatory move brought uncertainty and fear to the market, causing investors to shift their focus towards more established cryptocurrencies like bitcoin (BTC), ethereum (ETH), and stablecoins.
The dominance of Bitcoin, Ethereum, and Stablecoins
The total market share of bitcoin, ethereum, and stablecoins has now surpassed 80 percent, according to research company K33. This level of dominance has not been witnessed since February 2021. However, it is worth noting that bitcoin held a higher share at that time.
At the beginning of 2021, bitcoin’s overall dominance in the crypto market reached nearly 75 percent. However, altcoins gained popularity and decreased bitcoin’s dominance. With regulatory ambiguity persisting, it is likely that bitcoin, ethereum, and stablecoins will continue to dominate the market, while smaller altcoins face challenges.
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The future for altcoins: Regulatory uncertainty and resistance level
In order for altcoins to regain momentum, the growth in dominance of bitcoin needs to stabilize. Currently, BTC’s dominance hovers around 46 to 49 percent. The key resistance level for this indicator is around 60 percent.
According to K33, investment funds are unlikely to take risks in the current regulatory environment with low trading volumes. This cautious approach further limits participation in the altcoin market, leading to reduced liquidity and potentially prolonging a sluggish market.
As altcoins face the challenges of regulatory scrutiny and declining market share, investors are flocking towards the more established cryptocurrencies like bitcoin, ethereum, and stablecoins. The recent legal actions against Binance and Coinbase have triggered a significant shift in investor sentiment. Altcoin prices have plummeted, while bitcoin’s dominance is rising again.
The future of altcoins will depend on regulatory clarity and increased trading volumes. Until then, bitcoin and other leading cryptocurrencies are likely to continue dominating the market. Only time will tell if altcoins can regain favor and revive their dwindling market share.