The index that heralds the rally of Bitcoin: the chart of the week

The index that heralds the rally of Bitcoin: the chart of the week
The index that heralds the rally of Bitcoin: the chart of the week

As already happened in 2017, the Bitcoin could be ready for another rally. To say this is the trend of the index that measures the “dominance” of Bitcoin on the cryptocurrency market.

The Bitcoin Dominance Index it is calculated by comparing the total market capitalization of BTC with the total market capitalization of digital assets and signals the sentiment of operators towards the crypto market in general, BTC and how this ratio evolves over time.

Bitcoin: a new rally is coming due to dominance index

According to Nikolai Kuznetsov of Cointelegraph, the Bitcoin dominance index can help us understand what the price trend will be in the coming months thanks to the money flow model.

Dominance Bitcoin. Fonte: CoinMarketCap

“According to this model, fiat money (legal tender currency, ed) is first exchanged in Bitcoin, then becomes AltCoin (Alternative Coin, term used to define cryptocurrencies other than Bitcoin, ed) with large capitalization, later mid- cap and finally low cap AltCoin. From here yes go back to BTC and back to fiat money ”.

Based on this model, the current scenario, in which the dominance of Bitcoin is at its lowest since 2018 of just over 40 percentage points, could herald a price rally capable of raising the indicator.

In particular, Kuznetsov looks to 2017, when the dominance of Bitcoin in a few months has halved, falling below 40 percentage points. The subsequent rally brought prices close to 20 thousand dollars, compared to about one thousand at the beginning of the year.

Bitcoin price. Source: CoinMarketCap

New push for Bitcoin prices could come from institutional

Compared to 2017, today the number of players on the cryptocurrency market has grown considerably and, among these “newcomers” there are institutional investors. These could “exploit” discount prices to enter the market, thus causing dominance to rise.

On May 21, with prices below $ 36,000, there were purchases of $ 5.5 billion and hedge funds of the caliber of MVPQ Capital, ByteTree AM e Three Arrows Capital they all confirmed they had been shopping.

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