Crypto Global

Bitcoin rate consolidated | Is there a new rally coming up?

May 4, 2021

Is this the end of a high flight or can we expect a new rally? In today’s article we are going to cover the current market conditions, what happened to Bitcoin and where we are going.

The dominance of Bitcoin (BTC), or the ratio of the value of the largest cryptocurrency to the total market capitalization of digital assets, fell below 50% for the first time since 2018. And if bitcoin dominance continues to decline, we could see strong bullish move from altcoins, and we saw that with Ethereum last week. Although we had a slight market dip, we did have some bullish moments. Ethereum hit a new all-time high. We think Ethereum still has a lot of headroom, even if this market cycle is a little different this year.

We have a lot more basic protocols, a lot more cryptocurrencies competing for that bitcoin's market share. Ethereum is no longer Bitcoin's big and only competitor. There are other cryptocurrencies such as Cardano (ADA), Binance Coin (BNB) etc. that will even take a large part of this market share away from Bitcoin. What you can see is that the money from Bitcoin is currently flowing into other Altcoins. While the BTC dominance metric has been very reliable in the past, it is difficult to use as a safe tool to determine where the investments are going. What we can expect is that more money will be invested in altcoins if BTC dominance stays below 50% and continues to decline.

One reason for this decline in Bitcoin is that two weeks ago we had $4 billion in liquidations that affected retail investors. Private investors not only use their money in Bitcoin, but also in leverage positions in Bitcoin, Ethereum and a variety of other cryptocurrencies. Another reason is the "Biden tax increases" we probably saw on the internet recently. Biden suggests potentially increasing the tax percentage from 20 percent to 43.4 percent, which means new investors will receive a heavy capital gains tax. You can already see that investors are selling their cryptocurrency so that they will no longer be taxed at this new high tax rate in the future.

While it is not yet known whether this tax hike will be accepted, we would not recommend selling Bitcoin wherever someone is being taxed, as those tax rates could be introduced after the fact that even those who sell now would have to pay for it anyway. Those who invest in Bitcoin and Crypto for the long term don't necessarily end up being sold. We hope that many investors will want to do the same as the Crypto Holdler.