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Resurging BTC dominance poses risks for ETH

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Despite the immediate concerns of a sell-off, ETH price has gained nearly 7% in the last 24-hours, trading at $1,988 as of April 13.

The cryptocurrency market over the months has witnessed a resurgence in bitcoin’s (BTC) dominance over other cryptocurrencies, particularly ethereum (ETH). 

This comes as the Ethereum blockchain recently underwent the Shanghai upgrade, which has been seen as a long-term bullish event for the platform. Despite the immediate concerns of a sell-off, ETH price has gained nearly 7% in the last 24-hours, trading at $1,988 as of April 13.

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ETH 24-hour price chart | Source: CoinMarkeCap

However, the growing dominance of bitcoin may pose some risks for ethereum. We will delve into the factors contributing to this resurgence, discuss the implications for the broader market, and assess the potential impact on ethereum’s future.

Market uncertainty and BTC safe-haven saga

On April 12, 2023, Ethereum’s Shanghai upgrade, known as the Shanghai-Capella hard fork, went live. This upgrade unlocked over $31 billion worth of staked ETH in the blockchain since December 2020. 

Amid this, bitcoin’s dominance rate has risen to 46.2%, the highest since September 2022. This indicates that investors are favoring BTC over ETH, with ether’s dominance rate remaining between 19% and 20%.

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BTC and ETH dominance chart | Source: CoinMarketCap

Regulatory issues have also contributed to this uncertainty in ETH’s market standings. 

The U.S. securities and exchange commission (SEC) has alleged that ethereum staking services offered by centralized exchanges amount to selling unregistered securities in the U.S.

This has led to concerns that ETH faces higher regulatory risks than BTC, making investors more likely to prefer the latter.

Another factor contributing to bitcoin’s resurgence in dominance is its safe-haven appeal during banking crises. Bitcoin has evolved as a macro asset over the past few years, attracting investors seeking protection during financial instability.

The recent banking sector turmoil in the U.S. has further reinforced bitcoin’s position as a store of value, pushing its dominance rate higher.

Ethereum’s historical dominance over bitcoin

Ethereum’s dominance over bitcoin has seen fluctuations since its inception. While BTC maintained its dominance throughout 2016, ETH claimed a significant portion of the market in 2017. 

Despite bitcoin regaining dominance in early 2018, ethereum quickly reclaimed its position. bitcoin dominated Ethereum for three years, including during the 2018-2021 bear market. 

However, ethereum’s dominance increased in July 2021, reaching its peak as the Merge approached. As of April 13, ETH’s dominance has fallen from over 31% in 2017 to about 19% as of this writing.

The resurging dominance of bitcoin may lead to a shift in investor preferences, potentially impacting ethereum’s growth and adoption. As bitcoin gains momentum, it may attract more institutional investors, further solidifying its position as the leading cryptocurrency. 

Additionally, with regulatory concerns and market uncertainty plaguing ethereum, investors may continue to favor bitcoin, leaving ethereum at a disadvantage.

What does the future hold?

While the current market dynamics favor bitcoin, it is essential to consider the potential impact on ethereum’s future. 

Ethereum has a strong ecosystem, with numerous decentralized applications (dApps) and a growing decentralized finance (DeFi) sector. Despite short-term market concerns, the Shanghai upgrade could also boost Ethereum’s long-term growth.

However, ethereum must address regulatory risks and mitigate potential market volatility resulting from the upgrade. By doing so, it can maintain its position as a leading cryptocurrency and continue to attract investor interest. 

While the current market dynamics favor bitcoin, the inherent volatility of cryptocurrencies means that the situation can change rapidly. Therefore, investors need to closely monitor market trends and developments to make informed decisions and maximize their returns.

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