The current spike in the trading of alternative cryptocurrencies has prompted the dominance of the altcoin market, which refers to the percentage of the cryptocurrency market made up of altcoins (cryptocurrencies other than Bitcoin), to reach 50%. The community as a whole is excited about this trend, but some experts are already predicting that it could lead to a collapse in the near future.
Beware: A Crash Is Coming!
According to JA Maartun, a crypto analyst and the community manager for CryptoQuant, the fact that the trading dominance of altcoins has reached 50 percent is quite worrying. See Maartun’s chart below:
Maartun presented the above chart to support his claim that, in the past, when altcoins’ share of trading volume rose above 50%, a significant drop in the price of BTC often led to a similar decline in value across other markets.
The chart shows that the November 2022 dump in value was preceded by a period of increasing altcoin dominance, with alternative cryptocurrencies making up 55% of the total trading volume.
This occurred at a time when market sentiment was already negative and many investors were hesitant to engage with risky assets, despite evidence of expected crypto investment in 2023.
The United States Consumer Price Index (CPI) data is set to be released on January 12, and some experts predict it will show an increase in inflation. If this is the case, the Federal Reserve may continue to raise interest rates, which has previously caused a decline in the market capitalization of cryptocurrencies.
If future interest rate increases are paired with the current negative market attitude, the potential for DCG bankruptcy, and reduced market liquidity, it could lead to another collapse in not only the altcoin market but the overall cryptocurrency market as well.