Outside Source
Bitcoin’s open interest is still relatively high, but analysts cannot say the same for altcoins. The total open interest for alts listed on major crypto exchanges, excluding ether (ETH), has fallen 55% from an all-time high (ATH) seen on March 25.
The current aggregated value for these crypto assets is $8.75 billion, indicating that they have reached a point of seller exhaustion. According to analysts at the crypto exchange Bitfinex, this is part of a significant shift in relative altcoin strength against Bitcoin.
Altcoin Sellers Are Exhausted
The latest Bitfinex Alpha report noted a change in market dynamics: investors are not moving to Bitcoin for safety amid volatility but seeing potential value in or receiving positive signals from the altcoin market.
“Typically, during market downturns, traders often liquidate their altcoin holdings either for Bitcoin or for fiat, leading to an increase in Bitcoin dominance and a corresponding decrease in altcoin dominance. This behavior is based on the perceived safety of Bitcoin as a more stable asset compared to altcoins during volatile periods,” analysts explained.
Bitfinex said the latest change in altcoin market dynamics could be attributed to the fact that a huge part of the recent sell-off has been propelled by exchange-traded fund (ETF) outflows and spot selling. Many altcoins have already fallen about 80% from their ATHs, so sellers are likely experiencing fatigue.
Bitcoin Dominance Decreases
Since early 2023, altcoins, with the exception of some outliers, have steadily underperformed relative to bitcoin (BTC). Using ETH as a proxy for all altcoins, Bitfinex revealed that the ETH/BTC ratio has been on a downtrend since late 2022 and is currently under its 365-day Simple Moving Average—the ratio hovers below 0.042, its lowest level since April 2021.
However, seller exhaustion and the reduction in open interest amid the recent BTC sell-off have increased the possibility of altcoins outperforming BTC during market rallies. Bitfinex said such an occurrence could mark a major regime change in the crypto space, setting the market up for a very bullish momentum in Q4.
With altcoins showing resilience in downturns, Bitcoin’s dominance is likely approaching a local top. After the financial market decline in early August, the metric reached 57.7%, its highest value since March 2021, but the correction last week saw the figure decrease by 1.3%. Conversely, the dominance of other cryptocurrencies, excluding the top ten assets by market cap, rose by 4.4%.
This article first appeared at CryptoPotato
