Bitcoin dominance over other cryptocurrencies has risen back up to 45% after the weekend carnage that saw another US$400 billion wiped off crypto’s total market cap.
Crypto traders awoke to a bloodbath on Monday morning, with most altcoins having shed 20% to 30% of their value over the weekend. By comparison, the industry’s main players Bitcoin and Ethereum were down 7% and 10% respectively, demonstrating where the crypto faithful look for safety — relatively speaking, if an asset that can shrink by 7 to 10% overnight can be considered a safe harbor — in times of crisis.
While altcoins are now making impressive recoveries, Bitcoin’s dominance — at 45% — is once again nearing half the overall crypto market cap, according to Coinmarketcap.
The latest crypto sell-off, which initially began when Elon Musk suddenly declared that Tesla would no longer accept Bitcoin as payment due to environmental concerns, was spurred on by the news that Huobi, a major cryptocurrency exchange in Asia, reportedly will now scale back some of its offerings due to China’s increasingly hard-line stance against crypto trading and mining.
“When it rains, it pours. Bad news continues to flow in and weigh on crypto markets.” said Justin d’Anethan, sales manager at Equos crypto exchange, in an interview with Forkast.News. “Over the week, Huobi reportedly will stop hosting Chinese miners. OKEx and Huobi might also be putting restrictions on Chinese customers.”
Despite both Bitcoin and Ethereum losing half their value since posting all-time highs less than a month ago, the largest and second-largest cryptocurrencies are experiencing less volatility compared to the smaller altcoins.
“Those are a lot of reasons for investors to be uncertain and look for safety,” d’Anethan added. “For some, that means cash, for others, that means BTC. Alts are clearly underperforming with the BTC Dominance rising to 46%, coming up from 39% just earlier last week).”
Meme traders panic
Indications that tougher crypto regulations could be coming to the U.S. very soon as well as news of the DeFi100 hack that saw investors lose around US$32 million proved too much for the growing number of meme-investors, and panic ensued.
“Cryptocurrency prices are driving down by collective efforts,” said Toya Zhang, chief operating officer of AAX crypto exchange, in an interview with Forkast.News. “It started from the meme coin frenzy which in essence repeated the 2017 ICO (initial coin offering) hype — people looking for huge returns by investing a small amount of money in tokens with no intrinsic value.”
Zhang added that with the hype around meme coins, the real “sharks were ready to take profits” and the crypto downturn was already imminent.
“It is unhealthy for the crypto space, and once again proved that the market needs proper guidance and regulation to protect investors from chasing the bubble and to protect the healthy cryptos from being demonized,” Zhang said. “The speculative trading activities caught China’s attention and they have started to crackdown, again.“
Despite the Bitcoin price being slashed by over 22% over the last seven days, longer-term crypto investors might take comfort in knowing that as of today, May 24, BTC prices still grew over 300% since the same date last year.
China crypto mining crackdown a net positive?
While many in the industry fail to see China’s crackdown on Bitcoin mining as anything but bad news for the industry, Henri Arslanian, PwC’s global crypto leader, told Forkast.News that it could have long-term positive effects.
“The news from China is quite important, especially when it comes to Bitcoin mining.” Arslanian said. “65% of Bitcoin mining globally takes place in China. And it will be very interesting to watch over the next couple of months, with the latest announcements made by the Chinese government, whether this proportion will change.”
Arslanian believes that China’s Bitcoin mining crackdown could be a “net positive” over in the United States and that there is a lot of good news coming from the U.S. currently that should give the crypto industry confidence.
“For the last couple of months, we’ve had not only great positives on a policy side, on the regulatory side, and also, frankly, on the commercial side — but the U.S. also has a pretty interesting ecosystem for Bitcoin mining,” Arslanian said. “I’ll be interested to see if any of that mining migrates from China to the U.S. [That] can really solidify the U.S.’s role as a potential leading crypto hub.”
Bitcoin is currently trading at US$36,344 at the time of publication and BTC’s market cap now makes up 45.7% of the total US$1.44 trillion crypto market capitalization.