Bitcoin Dominance

Hey everyone, and thanks for jumping back into the cryptoverse. Today we're going to talk about Bitcoin. More specifically, we're going to be discussing Bitcoin dominance.

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Let's go ahead and jump in, uh, to Bitcoin dominance. So, the last Bitcoin dominance video we did, it was when Bitcoin dominance broke 65%. And in that video, I told you guys in that video that it's always dangerous making Bitcoin dominance videos going into FOMC meetings because a lot of times you can see short-term changes in the trend whenever that FOMC meeting actually occurs. And and you can see that, of course, you know, Bitcoin dominance did get a pretty big pullback.

And so now, of course, a lot of people are are once again calling for alt season for the 30,000th, 74th time. Um, and the question is, is are they going to be right this time? And you know, there's a lot of things to think about with regards to the altcoin market and Bitcoin, uh, Bitcoin dominance and how altcoins behave with respect to Bitcoin. Obviously, we've had a very big move by ETH Bitcoin, which whenever ETH Bitcoin moves in the upward direction, obviously Bitcoin dominance is going to take a hit.

What's really fascinating is it it seems like there's a chance that it could play out like we've talked about where on a potential pullback by ETH Bitcoin, um, the next pullback by ETH Bitcoin could coincide with a much larger drop in the altcoin market with respect to Bitcoin. So remember, when ETH Bitcoin goes up, it's going to be harder for Bitcoin dominance to go too much higher. But if there's a pullback by ETH Bitcoin that corresponds with a lower low on all Bitcoin pairs, you could see Bitcoin dominance in fact go higher.

The first thing I want to do is just look at seasonality, right? Do we get pullbacks by Bitcoin dominance during this time of the year or have we? And let's just look at this cycle. Let's just look at this cycle at least to begin with. This is May of 2025. You can see there was a pullback by Bitcoin dominance really starting the second week of May. What happened last May? Well, pretty similar thing, right? We saw Bitcoin dominance rally and then in May it dropped. Now, back then it dropped about four to 5%. This drop about 5%. So, a little bit bigger of a drop, but a drop nevertheless.

If you were to look at the relative strength index of Bitcoin dominance, you can see that it actually went pretty low. And if you look at where it just went throughout really since, you know, since the end of 2022, the daily RSI has only hit that level or slightly lower, lower a few times. The last time being November. And you can see that dominance did get a larger pullback, but it still went back up. The time before that was December 2023, and that ended up marking the low for Bitcoin dominance, uh, at least for a little while. Then it kind of double bottomed and then went up. The time before that was August of 2023, which marked a low for Bitcoin dominance. Close, it came close in March of 2023, which marked a low for Bitcoin dominance. And of course, it came that it went a little bit lower in October of 2022, which essentially marked a low for Bitcoin dominance.

So you have, you know, these these lows that occur on the daily RSI and you can see how they basically coincided with pretty major lows by Bitcoin dominance. Now what's interesting and of course you know what people are going to say is, well, the trend has to end at some point, right? Obviously, if you're a Bitcoin maxi, you're going to say the trend never has to end. For me, I assume the trend can go on until there's a sufficient change in monetary policy. Right? It's true that interest rates were already cut some. And during that process, you can see that Bitcoin dominance did have a pretty big sell-off, right? It did have a pretty big sell-off. Some people started taking some risk on altcoins.

But I think the argument here is that the Fed funds rate is still greater than RAR, which is the neutral rate. Now, if you're not familiar with the neutral rate, it's this like abstract or theoretical concept of whenever the Fed funds rate, whenever the interest rates are above the neutral rate, whatever it is, then the economy contracts. And when the Fed funds rate is below the neutral rate, the economy expands. So the argument here is that the Fed funds rate, so if you go look at at US interest rates, um, right here, you can see it's at 4.5%. So the argument here is that Bitcoin dominance is potentially telling us that, and some people are going to laugh at that obviously. I know I'm not, sometimes I don't necessarily believe everything that I say, but the argument is that 4.5% is greater than the neutral rate. And the argument is that if it were less than the neutral rate, then Bitcoin dominance would have actually gone down. But because Bitcoin dominance continues to go up, it suggests that the Fed funds rate is greater than the neutral rate.

Now, do I actually completely believe that? No. Because there's also validity to the idea that regardless of monetary policy, altcoins are oscillators at best. I truly do believe that. And that's why I've said before, you know, that there's going to come a time potentially where the Fed ends quantitative tightening. And if all Bitcoin pairs are still not at the range lows, what am I going to say then? To me, it's a convenient narrative to get, you know, to to to help people get to that destination, a believable destination. But there's also a reality that last cycle the low, uh, for all Bitcoin pairs and thus the high for Bitcoin dominance actually occur during quantitative easing, not quantitative tightening.

So for me at this stage of the cycle, you know, because alts never actually went down here, I still fade them on their Bitcoin pairs until they do. If the Fed were to end quantitative tightening tomorrow, obviously a lot of people would say, well, does that mean that that that alts are no longer going to go lower on their Bitcoin pairs? And honestly, the question would be, well, it depends. I mean, if all Bitcoin pairs are down here, then maybe not. If all Bitcoin pairs are up here, I probably would be stubborn and still say they're going to go to the range lows because we know they still sold off to new lows, even last cycle when we actually were under quantitative easing. It's just that when QT ended last cycle, you did get a bounce by all Bitcoin pairs and and a sizable bounce, right? I mean, it lasted for a while. The low was in August 2019 and then there was a slightly lower low in, uh, May of 2020, less than a year later, and then there was an even lower low, um, less than a year after that, right? That came all the way down there.

So, again, I would still argue that Bitcoin is is still a better play than the altcoin market. Doesn't mean that Bitcoin can't go down. You know, obviously, if you look at Bitcoin USD, we actually saw Bitcoin put in a lower high in May of last year. Um, and that first top occurred May 21st. So, like it's not entirely impossible for something like that to happen. But the point is is regardless of whether it whether Bitcoin breaks out or not, right? If Bitcoin sort of breaks out of here or not, and maybe you should look at total market cap. That actually might be a cleaner trend here. Total market cap, um, I think that's the argument, right? Regardless of of whether it it breaks out or not, Bitcoin dominance is probably going to go up. And the reason is because if total market cap breaks out and Bitcoin goes into price discovery mode, Bitcoin dominance is going to go up more than likely. On the counter, if it if Bitcoin if total market caps rejected and comes back down here for a lower low, Bitcoin dominance also probably likely, you know, it's probably going to go up. Um, you can see last year when total market cap got rejected in May, right? when total market cap got rejected over here and started to come back down. Um, you know, Bitcoin dominance during that process initially went up. It then came back down to sort of a higher low and then continued to go up as total market cap faded. And then, so a lot of times people ask me, well, is Bitcoin dominance going to go up on a Bitcoin rally or a Bitcoin dump? And the answer for me is always yes, right? Like you're missing the point. The point is that Bitcoin will go up and Bitcoin will go down. And my argument is that it just doesn't matter what way Bitcoin goes. In a few months, we'll likely look back and Bitcoin dominance will likely be higher, uh, than it is today.

Okay. So, now that doesn't mean that every altcoin has to go lower. If you were to look at at ETH Bitcoin, it did go pretty low, right? I mean, it did go pretty low. And to be completely honest, if ETH Bitcoin wants to maintain the plot, that needs to be the bottom because if it's not and it goes lower and it takes out this low, then you have lower highs and you have lower lows and then there's no hiding from it at that point, right? It would just be a relic. So, I I hope that ETH Bitcoin does find a bottom here so that the narrative lives on, but it's just something to keep in mind. There was also a rally by ETH Bitcoin in May of 2024 that ultimately faded. What I'm hoping for is that by the time this rally fades, potentially into the summer, will the Fed in QT by that point? Potentially allowing ETH Bitcoin to, you know, maybe maybe double bottom or something kind of like it did over here or maybe a higher low. Something to think about, right? Something to think about with regards to ETH Bitcoin.

Now, SOL Bitcoin, I'm talking about some of the higher market caps, right? SOL Bitcoin, as I've said for a while, I think it's just following ETH Bitcoin. I know a lot of people don't like it. Don't want to believe it, but that's what I think. And and I think that it's basically just repeating what ETH Bitcoin did and I think it's probably going to get rejected here. Um, could it bounce around for a while like it did over here? Yeah, absolutely. If you look at SOL Bitcoin market cap ratio, you know, this is what I said. I mean, it's going to bounce up to the bull market support band, which is where it is, and probably get rejected and go to a lower low. You can see that in 2022, this was in fact a lower low. So, what about after getting rejected basically from the same spot, but if you look at all Bitcoin pairs, I think they're going to go lower into the summer. Not just based on what I think Bitcoin is going to do, but just look at them. I mean, look at last year going into June. A lower low in June. Year before that, 2023, a big drop into June. Look at the year before that, a big drop into June. A lot of times, all Bitcoin pairs just kind of fall apart as we get into about about mid to late June or so. Is when they're was when they're really falling apart. And usually they bounce around that time like later June they'll start to bounce maybe July. Um, even over here in 2019 you can see they basically fell apart in June and then bottomed out in August September time frame. Um, here's a bottom here in September as well. Um, this bottom right there was in in, you know, May, late May, early June. So I I think that all Bitcoin pairs are likely going to continue to bleed here into June.

Okay. And if that's the case, then Bitcoin dominance could put in a higher high depending on what ETH Bitcoin does. Obviously, depending on that. So, you know, I would I would keep an eye on this because in the short term, I know a lot of people were sort of dunking on Bitcoin dominance again for the 900th time. But, you know what I see? I I just see Bitcoin dominance still above its 21-week EMA, right? I see a chart with monthly candles, monthly hyanashi candles that has literally had one red candle since November of 2022 and it was in December 2024 after Bitcoin dominance hit my conservative target of 60%. And when the Fed cut rates, but I think this is an argument that the Fed funds rate is still higher than the neutral rate. Also an expression that quantitative tightening is still going on. And the reality is that this trend probably does not end until monetary policy sufficiently changes. That doesn't mean that you can't have short-term drops, but it's probably not going to change until monetary policy changes.

One of the things though about ETH dominance going up is that when you add in Bitcoin dominance plus USDT dominance plus USDC dominance plus USDT dominance, you get a chart that looks like this. And note that it likes to go up to about 82% before topping out except for this one exception. And because ETH dominance is going up, that's actually continuing to help this chart go up despite the fact that Bitcoin dominance went down and that stablecoin dominance went down. It's because ETH dominance was going up and that actually kind of helped it as well. A lot of alts have been struggling. A lot a lot of them are stuck in traffic on struggle street. And again, if you look at alt Bitcoin pairs, I operate under the assumption that they will in fact go to the range lows. That's my assumption and I I will stick to it regardless of what people want to say. You know, people said all sorts of things about Bitcoin dominance. They were wrong, right? They said ETH was never going to go home. They were wrong. People say all sorts of things. You know, people are going to talk and they're allowed to, right? Let them talk. Doesn't mean they're right, right? Just because they call for alt season again doesn't mean they're right. If I had a if I had a Satoshi for every time someone told me that I was I was missing alt season, I'd probably have, you know, I'd probably have an entire Bitcoin. Uh, because it's basically every single tweet someone tells me what altcoin is doing better than Bitcoin that day. But the reality is that alts have been bleeding to Bitcoin for years. For years, right? others Bitcoin. I mean, basically every few weeks it just puts in a new low, right? Yeah. I mean, is it going to bounce at some point? Probably, but I don't think it's going to durably change until monetary policy really changes.

Okay. The other thing is if you look at all Bitcoin pairs, and if you look at it compared to 2019, the year that QT ended, you could argue that this is basically, you know, whenever it it does go back down to double bottoms regardless of whether it holds, it does bounce, right? You can see right here all Bitcoin pairs bounced in May up to the bull market support band and then down in June. What if the same thing's happening where you have, you know, you have your first low here and then I mean this is a wick down and this is your second low up to the bull market support band and then down into the summer. I think there's a good chance that that's what's going to happen. That's what I think. Now, ETH dominance basically swept that low from last cycle, right? and it swept that low from last cycle. Still not above the bull market support band on a weekly close. We'll see what happens to it, but I still think that there's a high probability that Bitcoin dominance will continue to go up. Um, and you know what I could see? I could see a a scenario where all Bitcoin pairs find 0.25 25 as early as this summer or maybe it takes as late as November. November 2017, all Bitcoin pairs were at the range lows, right? So, who am I to say that it can't happen again, but I also could see them going to the range lows this summer, right? and and maybe dropping down, bouncing back up, and then dropping again maybe for a double bottom down there or something and then and then back up again, right? It could do something like that. But this just to me it it seems like the most likely outcome for all Bitcoin pairs is down.

If you look at total 2 minus UST divided by Bitcoin, which includes ETH, it has had a nice rally, but it's also potentially just rejected here at that 21-week EMA. I know it's brutal. You know, if if you've been in altcoins for the last three years, I know it's brutal, right? Sometimes I wish I had a different message to share with you. But you have to remember that I don't always share what I, you know, it's I don't always share what I want to say. You know, it's not like I obviously if I knew for a fact that we were about to have alt season, I could just load up on alts and make a lot of money, right? I mean, like that would be nice. Uh, so you know, it's not that I don't want that stuff to happen. It's just that I'm trying to temper people's expectations because I feel like a lot of people have been lied to for the last few years by a lot of influencers constantly promising alt season. But remember, a lot of those people that are promising it are basically just getting paid to promote garbage altcoins, garbage memecoins. Um, and and so they're paid to be bullish on that stuff, right? At least with me, you know, I'm going to tell you what I think. I can be wrong though, right? But if I am wrong, it's not because someone paid me to say something. That's the difference, right? I I do get things wrong all the time. But, you know, if I do get it wrong, I it was it was really what I thought. And I think there needs to be some sort of flexibility, you know, an expectation that, hey, like I'm going to be wrong sometimes. And when I'm wrong, it's not the end of the world, right? It's just I'm going to be wrong. No one knows exactly what's going to happen in the markets. Had you told me it would take until April 2025 for Ethereum to go home, I would have laughed. But that's exactly what happened, right? I mean, Ethereum Ethereum didn't go home to the lower logger or to the fair value logger in the regression band. Didn't go down there until April of 2025, right? And right after it went home, it got a really big bounce on its Bitcoin pair. Who knew, right? Who knew? Big bounce on the on the Bitcoin pair.

The other thing to think about too with ETH Bitcoin, which you know could be a reason potentially why it has bottomed is whenever in 2019 when ETHUSD got the rally back up to the bull market support band after breaking down from the higher low structure right after it broke down from the higher low structure that first big rally that it got that was where ETH Bitcoin bottomed. So, you know, there's a chance. So, that's just what happened, right? If Bitcoin bottomed here, it's back up to the bull market band. If it goes lower, it's probably because Bitcoin USD goes lower, right? Um, so yeah, I mean, I I I think that it's definitely an interesting market, but a lot of these alts, I mean, like look at ADA. I mean, it's basically just doing what it did last year around this time, right? I mean, it's had the same exact valuations. The only difference is that I would argue it's more it's almost more bearish now than it was over here because at least over here we it was still well below the 20-week SMA. So you could argue it still had some mean reversion to go just to get back up there and then it did not too long later right in July. But now the 20-week SMA has had time to come down and now it's already there. So I feel like it has plenty of room to to potentially fall here as you go into into the summer months and you could look at a lot of different alts, right? I mean, you could look at a lot of different ones. You could look at like DOT Bitcoin just goes lower every time I check it. You could look at LINK Bitcoin just kind of riding that trend line down. Uh, you could look at BNB Bitcoin. You know, I kind of think what's most likely happen is headed back down to this level before too long. A lot of these alts, you know, just keep on bleeding back to Bitcoin. And I know it's exhausting. And I see people are saying, you know, hey, I'm tired. I'm tired, too, right? Uh, but this is just how the cycle's playing out. I don't control it. You don't control it. It is what it is, right? It just is what it is. And one of the things I learned long ago is trade the market in front of you, not the market you want. Um, and a lot of people want what happened in 2020 and 2021 to come back, but that's not the market we have in front of us, right?

If you look at Bitcoin dominance year to date without stablecoins, it's up a lot. In fact, it's up more than it was at this point in 2024, and it's up more than it was at this point in 2023, right? So, for all everyone talking about how how bearish dominance is recently, I mean, like, it's still doing better than it did in 2023 and 2024 at this point. And you can see in both cases, it just simply continued to move higher into the summer. If we were to take an average of Bitcoin dominance without stablecoins in 2023 and 2024, this the average and here's 2025. You know, I mean, if anything, 2025 has been stronger than the average of the last two years. Even with this pullback, look at 2019. It's still right around where it was in 2019 around this time. And that was a a very bullish year for Bitcoin dominance, at least through September. So, you know, I I still think and one of the other things to look at too is if you look at the risk metric for, uh, for Bitcoin dominance, it has gone pretty high, right? It it absolutely has. It's gone to about 939 risk and it just got a pullback. It also did something very similar in 2019 where it went to that exact same risk level basically and then got a pullback to basically where it just went and then it still exploded higher into into the summer into the later part of the summer.

So, I still think this is going to go up primarily because quantitative tightening continues. I think the Fed funds rate is greater than the neutral rate. Alt Bitcoin pairs are still off their range lows. Those are the reasons. If all Bitcoin pairs were down here, especially considering where ETH Bitcoin is, I wouldn't be necessarily bullish on it in the same way. Like I on dominance in the same way. But because alts are up here, it just seems like this is the destination. I can't help it that it's taking years to convince people, right? Like I wish it had happened years ago like it, you know, in last cycle it all happened in the pre-halving year, right, where we came to the range lows. I've done my best, right? You can't say I didn't try. I tried to convince people this long ago. It's just sort of the slow acceptance that that's what's happening. And I think that's what's going to continue to happen going into the summer would be the base case, right? That would be my base case.

The other thing to consider too is that all Bitcoin pairs have been tracking net liquidity. Not M2. I'm talking about the balance sheet of central banks. They've been tracking net liquidity pretty closely. And one of the things to consider here is that net liquidity is a strong function of the US dollar. And the dollar is likely going to go up in the short term, which means net liquidity is likely going to go down. And as net liquidity goes down, all Bitcoin pairs go down. The reason why I think the dollar is going to rally is because I I think that, you know, it it already just had a massive sell-off. And I think that it's likely going to get at least some mean reversion back to its own bull market support band. Right. I was a little,

You know, a little unsure if it was going to get past this. Uh, but the fact that it has makes me think it's just going to rally, you know, potentially quite a bit higher here, up to maybe 103 to 104. I think it actually will go up a lot more in 2026. But I think in 2025 it might come back up here and then maybe come back down, right? And then and then may maybe put a new low again, right? And then go up. But I I do think that the dollar um has more upside over the next couple years than the downside.

You know, you could look at 2017 and see this initial sell-off and then it got up higher and then it went lower and then it went right back up to where it was in in 2016. But if you look, you know, if you go look at at the um year-to-date ROI of the dollar, one of the interesting things about it is um it's already dropped more in 2025 than it did for most of 2017, right? Like 2017 it did drop a little bit lower but not that much lower than it already has, right? I mean in 2017 the low for the dollar draw down was just like, you know, 894, so like like 10.6%. It's already dropped 9.4%. Right. So like I don't even like even if it plays out like 2017, I don't it might only sweep the prior low for the dollar. I don't I don't know that it's actually going to go that much lower.

And then look at what happened in 2018. The dollar just went up. You have to be careful with some of this stuff. And look, I mean, hopefully this stuff happens on a Bitcoin rally, but it could also happen on a Bitcoin dump. I mean, even if you look at at Ethereum, you know, I I know you look at like say 2025 and it it looks pretty good recently, but then I compare it to 2018, I'm like, well, hell, how is it any different? You know, I mean, it it it looks kind of bad. It doesn't really look like 2024 or 2023 to me, right? It it looks more like a, you know, like a rally into um like let's look at Ethereum here.

And I want Ethereum to go up, right? I was all about it back when it went home. Hopefully, it does, honestly. I just know that, you know, sometimes it'll it'll get these rallies and then top out in May. I mean like or April and then go lower into the summer. Hopefully it doesn't, right? Hopefully hopefully that's enough. It's already had a lot of pain. I think it's sufficiently wrecked on its Bitcoin pair. If it goes lower on its USD pair, it's only because Bitcoin's going lower and Bitcoin's putting in a lower high like it did last May. That's the only reason. I think ETHUSD has gone low enough as long as Bitcoin can go higher from here. That's a big if.

So, I think what we're likely going to see happen is Bitcoin dominance slowly start to grind back up kind of like it did last May, right? A drop to the bull market and then a slow grind back up. Uh, it could take a little while, right? I'm not saying, you know, it's going to be at 66% tomorrow, but I really wouldn't be that surprised if this summer Bitcoin dominance is just once again putting in higher highs and all the people that called for alt season for how, you know, for how many who knows how many times they just start walking that back again, only wait for the next drop to then hopefully call for alt season again. There.

And I I did a video on this where I I talked about how a lot of people, you know, just think about alt season constantly. And alt season is something that only lasts a few months, right? So like they basically what they do is they buy altcoins throughout this entire which is what I did last cycle, right? They buy all coins throughout this entire phase and then by the time you get alt season, you have to have, you know, 70% of the alt season just to break even on your average entry into altcoins on their Satoshi valuations, right? Like think about it. If you've been DCAing altcoins that have been bleeding back to Bitcoin for the last four years, you require 70% of an alt season just to get back to break even. That's the reason why Bitcoin dominance is important. That's the reason, right? I know it's deterministic. I get it. And and you know, believe me, I know the dangers of being deterministic, but you got to stand for something, right? And Bitcoin dominance has played out. ETH went home. All it's got to go home, too. They had their own home as well, and they're still lost out in the village somewhere. Uh, they may have had a few too many drinks, but I think they're going to go home.

Okay, so this summer I'm thinking we'll see them go home. If I'm wrong, I will come on here and own it, right? I will own it and and you guys can laugh, right? You guys can laugh. But I really think that that is the most likely outcome. You just can't convince me that the collective altcoin market is better than Bitcoin. You cannot convince me and you never will. Right? You can try, but it's just going to go in one in one ear in one ear and out the other because I've been in crypto for far too many cycles to to to not be fooled by that. Right? I know that altcoins are oscillators at best. Right. This to me is the best case scenario that that's where they bottom, not the worst case. Just like Bitcoin dominance going to 60%. That was the conservative target, right? And I tell people in ITC premium all the time, you know, it wasn't I was never concerned about dominance hitting 60. I was concerned about, you know, what happens if it hits 60 and then I change my tune and then it goes to 70. But monetary policy hasn't changed. There's no reason, right? There's no reason in my mind to assume that alts won't eventually capitulate to the range lows.

And if it feels like we're running out of time, just remember in 2019, all Bitcoin pairs were at this exact valuation in July and then they were basically at the range lows by August. You know, a month later, a month or two later, they were there. It can happen quickly. I know it hasn't this cycle because, hey, the Dens keep holding on, but it is something that I I do think is is going to happen. So, those are my views about about Bitcoin dominance. You know, same old thing. But this is what I think, right? And and I I really think that uh with the long end of the yield curve moving up recently as well, that's going to be a drag on altcoins. Um and and for those reasons, right, for those reasons, I think that Bitcoin dominance will likely continue to slowly go back up. And that doesn't necessarily mean that all altcoins have to go to lower lows, but I do think the collective altcoin market will in fact go uh to a a lower low.

And again, if you look at total 2 minus UST divided by Bitcoin, if you assume uh that it has to go to where it went last cycle, then it still has a little bit to go. But again, a lot of that could just be due to alts, not Ethereum, right? It could just be all Bitcoin pairs are responsible for a large part of that final drop to that level. And and um yeah, but those are my views on Bitcoin dominance. Should be no surprises to you guys. Again, the Bitcoin conference is coming up really soon. Just, you know, really less than a couple weeks away. Hope to see you guys there. It'll be in Las Vegas. Uh so looking forward to that. All right, guys. We'll wrap it up. I'll see you guys next time. Bye.