Initiating the era of digital assets comes with a few perks that Bitcoin (BTC-USD), the original cryptocurrency, enjoyed for quite a while. Market dominance was one of them, and, seen as a safe haven on multiple market cycles, BTC enjoyed the lion’s share of above 50% of the market until the competition -the rest of the crypto ecosystem- picked up.
Bitcoin dominance is often associated with stability across the crypto market, where investments are directed toward the original cryptocurrency and investors’ trust in BTC is high. So, it’s no coincidence that BTC slipped below 50% dominance mere weeks before the Terra ecosystem meltdown in April 2021 and stayed between 40%-50% levels while the crypto market endured the Celsius, 3AC, and FTX collapses.
Now, after two years of tumultuous market activity, Bitcoin has steadily increased its market share since the start of 2023 and crossed 50% dominance in June, bringing BTC’s market cap above all the rest of the cryptocurrency industry combined. Here’s why.
#1. No BTC Mention in SEC vs. Binance and Coinbase Lawsuits
The Securities Exchange Commission (SEC) filed lawsuits against leading cryptocurrency exchanges Binance (BNB-USD) and Coinbase (NASDAQ:COIN) last month. The allegations revolved around the accusation that these crypto exchanges offered various altcoins as unregistered securities. Should the SEC's lawsuit prove successful, altcoins may face increased regulation and shift towards offshore and decentralized trading.
The lawsuit didn’t mention the two largest cryptocurrencies, BTC and Ethereum (ETH-USD). As a result, Bitcoin dominance has seen a surge as the case caused investors to relocate their investments from altcoins to Bitcoin, turning it into a safe haven once again.
#2. Blackrock's Bitcoin ETF
The world’s-biggest asset manager with $9 trillion under management, BlackRock (NYSE:BLK), recently filed for a Bitcoin exchange-traded fund (ETF), an investment vehicle that tracks the value of an underlying asset. The SEC has previously rejected several spot ETF applications, stating concerns about Bitcoin price manipulation as the reason. Nevertheless, the approval doesn’t seem far away, as BlackRock has an ETF approval rating of 99.83%, and the application includes a surveillance-sharing agreement that could eliminate the risk of market manipulation.
Eric Balchunas, the senior ETF analyst at Bloomberg, called the prospective BlackRock Bitcoin ETF “the real deal,” stating it isn’t much different from GLD, the SPDR Gold Shares ETF (NYSEARCA:GLD), which tracks the price of gold by holding physical gold bullion in its portfolio. Reflexivity Research co-founder Will Clemente exemplified GLD’s huge bull run, which started with its launch, as a potential price action for BlackRock’s Bitcoin ETF.
#3: Buy the Rumor: Fidelity’s Crypto Action
Mining Bitcoin since 2014, Fidelity, the world’s third-largest asset manager, with $4.24 trillion under management, is also rumored to be planning an impactful move in the cryptocurrency markets. It is suggested that the firm is expected to make a buyout bid for Grayscale, the fund manager controlling the Grayscale Bitcoin Trust (OTC:GBTC), and/or launch its own spot Bitcoin ETF.
For years, Grayscale has been trying to convert the GBTC to a spot Bitcoin ETF. The conversion request has been denied by the Securities Exchange Commission (SEC), which led to Grayscale suing the agency in June 2022, claiming the regulator was acting arbitrarily in rejection of spot Bitcoin ETFs, despite having previously approved Bitcoin Futures ETFs.
#4: Bitcoin Innovation Ramps Up
While Bitcoin’s price action was the highlight for some time, developers never really stopped exploring the infrastructure of the original blockchain. After a privacy update in 2021 enabled data storage on the Bitcoin network, Ordinal inscriptions resembling NFTs started showing up on the same infrastructure.
Albeit controversial, Bitcoin Ordinals showed clearly that there’s still much left to discover in Bitcoin in terms of innovation and pushing for new horizons.
Another front for Bitcoin-driven innovation was discovered when Stanford University professor David Tsè and his team’s research revealed a “natural synergy” between Bitcoin and Proof-of-Stake (PoS), the mechanic that’s mainly used by the Ethereum-based DeFi ecosystem, emphasizing that developers can focus on building applications using Bitcoin’s unmatched liquidity pool.
Instead of the vast network of miners maintaining the Bitcoin blockchain, PoS-based blockchains are driven by the staking mechanism. Cosmos-based blockchain Babylon (where professor Tsè serves as CTO) aims to find an ideal middle ground between Bitcoin and the DeFi world by utilizing the former as a timestamping service to provide better security for important transactions and censorship resistance.
Bitcoin’s recent resurgence to over 50% market dominance bolstered investor confidence in the asset as a safe haven. While it can be tied to multiple factors, what’s more important is what lies ahead. The ETF filings by the world’s largest wealth managers indicate retail investors are not alone in trusting Bitcoin. Coupled with the expanding innovation, Bitcoin has the potential to welcome a new massive wave of adoption.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.