Bitcoin Dominance Surges to New Yearly High of 58% Amid Market Turmoil

Bitcoin Dominance Surges to New Yearly High of 58% Amid Market Turmoil

Bitcoin’s market dominance—its share of the total cryptocurrency market capitalization—has reached a new high for the year, touching 58% on August 5, following a sharp sell-off in both crypto and stock markets.

In the early hours of August 5, Bitcoin’s dominance briefly hit 58.1% as a sudden market downturn saw Ethereum plummet by 18% in just two hours, while Bitcoin itself declined by 10% within the same timeframe.

Tony Sycamore, an analyst at IG Markets, highlighted that this drawdown underscores Bitcoin and the broader crypto market‘s position at the “pointy end” of the risk asset spectrum.

“This is a classic position washout,” Sycamore explained, attributing the sell-off to growing fears of a recession and the possibility of a hard landing, compounded by escalating geopolitical tensions, particularly between Israel and Hezbollah, which exchanged rockets over the weekend, leading to an increased U.S. military presence in the region.

Sycamore further elaborated that the broader market bloodbath in Asia, which included an 8% daily drop in Japan’s Nikkei 225 and trading halts in South Korea, contributed to a global risk-off sentiment.

“If you look at the markets that performed exceptionally well at the start of this year, tech stocks, Bitcoin, and Japanese equities stand out,” Sycamore noted. “So, it’s no surprise that these are the sectors experiencing the steepest declines now.”

Sycamore also pointed out that Ethereum has been particularly hard-hit due to the multitude of tokens and ecosystems built on its network.

“When altcoins get hammered, it reverberates through Ether’s price action as well,” he said, citing significant sell pressure from crypto trading firm Jump Crypto as a contributing factor.

In the past week, Ether’s price has plunged 30%, while major altcoins like Solana, BNB, and XRP have seen declines of 35%, 25%, and 21% respectively, according to CoinGecko data.

Looking ahead, Sycamore identified the upcoming release of the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers Index (PMI) report as a key indicator of the market’s future direction.

“The ISM report has the potential to either alleviate or exacerbate concerns,” Sycamore said. “If we start seeing cracks in the labor market, it could indicate that the Federal Reserve has missed its window, likely leading to further downside for all risk assets, including cryptocurrencies.”

Sycamore added that if the ISM numbers signal an expansion in manufacturing, it could suggest that the market is more resilient than anticipated, potentially providing a floor for risk asset prices.

“However, if manufacturing, the labor market, and services all point in the same negative direction, that could be a serious cause for concern,” he warned.

Over the past 72 hours, the crypto market has shed up to $500 billion in market capitalization, marking the largest three-day sell-off since August 2023.