The Week Bitcoin Dominated the Cryptocurrency Market
Bitcoin underwent a painful correction Thursday, losing roughly $2,000 peak to trough in a selloff that quickly engulfed the broader cryptocurrency market. Despite the reversal, bitcoin still managed to book solid gains for the week, underscoring the resilience of the yearlong bull trend.
Altcoins and tokens weren’t so lucky, as most of the majors posted sizable losses for the week. The selloff has relegated altcoins to a much smaller share of the market than they started with in 2019. As bitcoin dominance continues to grow, the future of altcoins looks bleak.
Bitcoin Still Higher for the Week
After making a fast break toward $13,200, bitcoin’s price underwent a sharp correction on Thursday, falling to the low $11,000 range. The selloff was mainly due to bullish exhaustion after bitcoin managed to recover some 85% from its previous low.
The decline itself wasn’t out of the ordinary given bitcoin’s previous market cycles. As we saw during the 2015 and 2017 bull rallies, corrections of 30% or more are fairly common during uptrends. Year-to-date, bitcoin’s price has fallen 30% on only one occasion.
As Hacked reported Thursday, bitcoin’s long-term bullish view remains intact because “adoption is growing, network activity is increasing and anticipation for the May 2020 halving event is building.”
Bitcoin’s price stabilized on Friday and was last seen trading just north of $11,725, according to CoinMarketCap. The leading cryptocurrency rose 4.5% during the week. The price is up three-fold on the year.
Altcoin Selloff Intensifies; Bitcoin Dominance Grows
Bitcoin’s correction triggered a massive selloff in alternative coins, which shed a combined $14 billion on Thursday. The losses dragged most of the majors into negative territory for the week, with EOS, bitcoin SV and Cardano among the biggest losers.
Chainlink also pulled back sharply from its recent run of parabolic gains. The decentralized oracle service is down more than 16% over the past seven days.
As a result of the declines, bitcoin’s dominance rate – i.e., the share of the overall cryptocurrency market held in BTC – peaked at 65.7% on Thursday, the highest in 27 months. Bitcoin dominance has grown three percentage points this week and roughly 14 percentage points year-to-date.
At the start of 2019, bitcoin accounted for just over half of the cryptocurrency market cap.
Trump Attacks Crypto
President Trump took to Twitter Thursday to express his displeasure for anything cryptocurrency, arguing that “unregulated crypto assets can facilitate unlawful behavior, including drug trade and other illegal activity.”
I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity….
— Donald J. Trump (@realDonaldTrump) July 12, 2019
As our own Wes Messamore noted, Trump’s objection to cryptocurrencies is based on the same old arguments: Not Money, Too Volatile, Not Based on Anything, Used by Criminals.
Trump also used Twitter to bash Facebook’s forthcoming Libra, a controversial new cryptocurrency that will power the social media network. Libra “will have little standing or dependability,” Trump said. “If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations…”
Fed’s Powell Compares Bitcoin to Gold
While President Trump was bashing cryptocurrencies, his arch-nemesis Jerome Powell of the Federal Reserve was comparing bitcoin to gold.
In prepared testimony before the Senate Banking Committee on Thursday, the Fed chief said “almost no one uses bitcoin for payments, they use it more as an alternative to gold.” In other words, bitcoin is “a speculative store of value.”
. Fed Chair says Bitcoin is a Store of Value, and will never go back to gold standard- he is literally saying DROPGOLD- he should be in next DROPGOLD campaign commercial pic.twitter.com/U3Bt7RN4O6
— Simon (@Simon23105395) July 11, 2019
That the world’s top central banker acknowledged bitcoin as a form of ‘digital gold’ speaks volumes to the growing realization that cryptoassets could transform the financial system. Although Powell said widespread adoption of digital assets hasn’t materialized, “that’s not to say we won’t,” he told the Senate Banking Committee.
Since inception, bitcoin has become the world’s leading store-of-value asset, having outperformed traditional markets almost every year of its existence. As central banks prepare to ease monetary policy again, bitcoin could become a premier hedge against inflation. Also read: Five reasons Why Bitcoin Is Surging.
The Week Ahead and Things to Consider
Bitcoin has clearly run into major resistance at $13,000. Although the uptrend remains intact, price action could get more choppy moving forward. Bitcoin’s indicators are overheated, which makes a retracement back down to $9,000 possible in the short term.
Until now, major retracements have been mostly anomalous (i.e., one-off events caused by whales), with the latest 30% correction being the only notable exception.
Bitcoin’s growing dominance means altcoins and tokens have failed to escape the King’s immediate sphere of influence. Although several altcoins have performed on-par with or better than bitcoin this year, the market as a whole has failed to keep pace. The erosion of the altcoin market could continue in the short term, especially as Ethereum fails to keep up with BTC. Read more: Ethereum’s Catch-Up Game Could Spark the Next Major Crypto Rally.
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.