Bitcoin’s dominance has reached a two-week high. What’s next?
After the news that El Salvador officially accepted bitcoin as a legal means of payment, the historical coin showed a steady increase to $38,500. During the week, the first cryptocurrency held a high level amid speculation that other Latin American countries may follow the example of El Salvador and legalize bitcoin as a currency. This is a historic victory for the main cryptocurrency, which has managed to go a long way.
In addition to such a positive impulse, billionaire Elon Musk announced that Tesla (NASDAQ:TSLA) will continue to accept cryptocurrency when miners start using 50% of clean energy. After his tweet on Sunday, bitcoin rose by 9.7% to $39,800, testing resistance at $40,000 for the first time in three weeks.
Bitcoin
Due to the increase in the relative strength of bitcoin, the BTC dominance index showed a noticeable increase from 41% to almost 46%. The index showing the market capitalization of bitcoin in relation to the entire cryptocurrency market, which has been in a steady downward trend since the beginning of 2021, has finally shown signs of a reversal in the last few days. Now close attention is focused on this index, and continued growth may signal a difficult period for altcoins.
From the standpoint of technical analysis, the forecast for BTC is generally optimistic. On Tuesday, BTC tested a critical support level of $31,000 and has since recovered. While the BTC price is still trading below the dynamic supply zones of the 21-day and 55-day exponential moving averages, the price is starting to test resistance around $40,000. If BTC can create an upward momentum to overcome the dynamic resistance zones, it can return the course to recovery.
In the Binance derivatives market, open interest in bitcoin has significantly recovered. On June 10, open interest in perpetual BTC/USDT contracts increased from 1.3 billion to 1.9 billion US dollars – this is the highest level since the market collapse on May 19.
Usually, analysts and traders use open interest as an indicator of market sentiment and the strength of price trends.
Open interest shows the incoming and outgoing capital in the market. As more capital enters the futures market, open interest increases. And vice versa: when capital outflow increases, open interest decreases.
The recent jump in the BTC exchange rate, along with an increase in open interest, is a positive sign indicating an influx of new capital.
Ethereum and Altcoins
In recent weeks, the Ethereum (ETH) and Bitcoin exchange rates have not demonstrated separation. It is noteworthy that in recent weeks, ETH has recovered better than bitcoin, as investors remained optimistic about its fundamental prospects and growing institutional demand. But last week the trend turned around. Ether ends a two-week series of growth with a weekly drop of 7.5%. The low efficiency of ETH was accompanied by a significant underlying decline in the altcoin sector, as capital returned back to bitcoin.
According to CoinMarketCap, last week none of the top ten cryptocurrencies could match BTC in terms of resistance to market events. The main altcoins, such as Ethereum, Cardano, BNB and XRP, fell more than the main cryptocurrency. The separation of ether from bitcoin is also marked on the ETH/BTC chart. The ETH/BTC chart showed a significant decline, falling by 15% compared to the previous week.
The ETH/BTC chart, which has historically been a reliable growth indicator for all altcoins, continues to decline in the last few days. Due to the fact that Bitcoin dominates Ethereum, it is likely that other altcoins will follow its example.
Despite the short-term drawdown, the ETH price is still holding above the critical support zone at $2,200. A decisive break above $2600 will resume the bullish momentum and activate the uptrend.