Altcoin Rally, Manipulation Erode Bitcoin Dominance Index
Cryptocurrency markets experienced a broad pullback Friday but secured strong weekly gains on the back of stellar growth for the likes of EOS, IOTA (MIOTA) and Zcash (ZEC). Bitcoin’s dominance index, which represents BTC’s share of the overall market, has fallen to the lowest levels in a month.
As a nascent asset class, crypto is prone to price manipulation, fake news and outright lies. The erratic movement in bitcoin SV (BSV) over the past five days has elevated those concerns. The so-called ‘Satoshi Vision’ pumped an insane amount this week after a fake screenshot about an imminent Binance re-listing of BSV circulated across Chinese media. Its subsequent flash crash on Bitfinex raised alarm bells that there was some rigging going on behind the scenes.
Bitcoin Dumps After Hitting $9,000
The bitcoin price notched a new yearly high Friday, poking above $9,000 for the first time since April 2018. But the higher high was short-lived, as an ensuing flash crash sent the price back down to the low-$8,000 range. As CCN’s Joseph Young pointed out, the pump-and-dump was likely caused by a “fakeout breakout fueled by the liquidation of contracts on BitMEX.”
BitMEX is one of the largest and most liquid markets for bitcoin. During the height of the bull rally earlier this month, the derivatives exchange was turning over more than $10 billion in daily trade volumes.
At the time of writing early Friday, bitcoin was trading around $8,400 on Bitstamp, down 3.5% on the day but still up more than 5% over the course of the week.
Bitcoin’s vital signs were unaffected by the erratic price reversal on Friday. The largest cryptocurrency remains in a bull market, underpinned by high demand and strong momentum.
Altcoin Season Heats Up Again
Bitcoin’s weekly returns paled in comparison to some of its altcoin peers. Coins not named bitcoin reached a cumulative value of $127 billion on Thursday, their highest in over six months. Read more: Crypto Market Tops $280 Billion as Bitcoin Dominance Index Continues to Plunge.
IOTA surged to fresh yearly high after the internet of things protocol announced efforts to boost decentralization on its modified Tangle blockchain. Ledger Nano X, a leading hardware wallet, also announced support for MIOTA. Week-on-week, IOTA gained nearly 23%. Gains would have been much higher had it not been for a sharp pullback on Friday.
The privacy-focused Zcash also had a strong week, as the bulls zeroed in on the psychological $100 level. ZEC would peak just above $99 before shifting lower on Thursday. For the week, it gained just over 20%.
Large-caps like EOS, XRP and Litecoin also rose sharply this week. EOS returned 24.5%, XRP gained 11.3% and Litecoin added 12.6% over the past seven days. All three coins experienced a sharp pullback on Friday.
Bitcoin Dominance Falls
The relative out-performance of altcoins and tokens has pushed bitcoin’s dominance index down to the lowest level in nearly a month. Bitcoin’s percentage of the overall cryptocurrency market fell to 55.3% on Friday, according to CoinMarketCap. It peaked around 60.5% three weeks ago.
A lower dominance rate is by no means a bearish indicator for bitcoin. During the height of bitcoin euphoria in December 2017, the BTC dominance rate fell to around 41%. It would eventually reach 33% during the height of the altcoin bull market in January 2018.
Nevertheless, the cryptocurrency market operates in cycles, with investors shifting between altcoins and bitcoins in semi-recurring intervals. Another prolonged bout of altcoin season could see bitcoin consolidating in the near term before the bulls make another attempt at $9,000.
Ultimately, crypto bulls want to see greater price independence between bitcoin and its alternative peers. A lower dominance rate suggests bitcoin is exerting a smaller gravitational pull on the market.
Bitcoin SV: Price Pumps and Manipulation
Bitcoin SV launched through the stratosphere earlier this week after its notorious backer Craig Wright filed a copyright claim for the original bitcoin whitepaper penned by Satoshi Nakamoto.
It didn’t take long for the U.S. Copyright Office to say it did not “recognize” Wright as the chief bitcoin architect.
But that didn’t prevent bitcoin SV from surging. After months of dismal trading, BSV nearly tripled in value in a matter of days, eventually peaking at $251, a new all-time high. It was last seen trading around $189, having gained 89% over the course of the week.
On Bitfinex, BSV crashed to a low of $44 on Thursday, fueling price manipulation fears. As it turns out, BSV was being propped up by fake news claiming that Craig Wright transferred bitcoin from a wallet that belonged to Satoshi Nakamoto. Such a move would offer definitive proof that Wright was indeed the bitcoin founder.
Dovey Wan identified the fake news by tweeting a screenshot of a doctored WeChat exchange that suggested Binance was going to re-list bitcoin SV.
Seems someone did it purposely just around the same time BSV pumped just an hour ago.
Completely fake news but “real enough” to trick many Chinese retails pic.twitter.com/qiWtW6Z8bC
— Dovey Wan 🗝 🦖 (@DoveyWan) May 29, 2019
The Week Ahead and Things to Consider
With a monthly return of 57%, bitcoin is rounding out its longest winning streak since August 2017. The largest cryptocurrency has rallied for four consecutive months and is up 162% from its December swing low. Large-cap altcoins, which sparked the initial market rally all the way back in February, are also gaining ground.
Crypto traders are converging on a new bull market – one that could have far-reaching implications on the future of digital assets. Unlike the 2017 bull market, the 2019 version is being supported by new infrastructure to enable mass adoption of digital assets.
As The Rhythm Trader recently tweeted, last time bitcoin crossed $9,000, “Square wasn’t selling it. Fidelity wasn’t storing it. Congress wasn’t fighting it. Bakkt wasn’t launching with it. Microsoft wasn’t building on it. TD Ameritrade wasn’t trading it. Whole Foods wasn’t accepting it.”
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock. Charts via CoinMarketCap.