Bitcoin’s share of the overall crypto market capitalization, the so-called Bitcoin dominance, is nearing a two-year high amid a regulatory crackdown on altcoins and crypto companies in the US.
As of Friday at press time, the Bitcoin dominance stood at 47.8%, just below a short-lived peak from July of 2021 that reached 48.2%.
The steady rise in dominance seen this year comes as crypto companies have faced tougher scrutiny by regulators, particularly in the US.
SEC names tokens as “securities”
In its recent lawsuits against Coinbase and Binance, the US Securities and Exchange Commission (SEC) even went so far as to name specific tokens as “investment contracts, and thus as securities.”
The tokens named by the SEC were SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO.
Since the lawsuit against Coinbase, all of the altcoins named as securities have fallen sharply in BTC terms.
“SOL is not a security”
Among those who have responded to their token being named as a security by the SEC was the Solana Foundation, which in a statement, insisted that “SOL is not a security.”
“SOL is the native token to the Solana blockchain, a robust, open-source, community-based software project that relies on decentralized user and developer engagement to expand and evolve,” the Solana Foundation said.
For now, however, both the SEC and other regulators such as the Commodity Futures Trading Commission (CFTC) appear to be in agreement that at least Bitcoin is a commodity, and therefore not a security.
Meanwhile, the situation for Ethereum’s native ETH token is less clear, and there is a real fear in the community that ETH could also be declared a security along with other altcoins.
If Ethereum (ETH) is officially recognized as a security by regulatory authorities, it is highly likely that there will be a more severe regulatory crackdown on almost all cryptocurrencies, excluding Bitcoin. Consequently, this could lead to a significant increase in Bitcoin’s dominance within the overall market
Bitcoin dominance has reached a two-year high of 49.29%, as of June 13, 2023. This means that Bitcoin now accounts for nearly half of the total cryptocurrency market capitalization.
There are a few reasons why Bitcoin dominance has been rising in recent months. One reason is that the SEC has been cracking down on altcoins, which has led to some investors selling their altcoins and buying Bitcoin instead. Another reason is that Bitcoin has been performing relatively well in recent months, while altcoins have been struggling.
The rise in Bitcoin dominance could have a number of implications for the cryptocurrency market. For one, it could make it more difficult for altcoins to gain traction. It could also lead to a more concentrated market, with Bitcoin becoming even more dominant.
Of course, it’s impossible to say for sure what the long-term implications of the rise in Bitcoin dominance will be. However, it’s clear that this is a trend that investors should be paying attention to.
Here are some of the factors that could contribute to Bitcoin dominance continuing to rise:
- Regulatory uncertainty: The SEC’s recent crackdown on altcoins has led to some investors selling their altcoins and buying Bitcoin instead. This is because Bitcoin is seen as a more regulatory-friendly asset.
- Technological improvements: Bitcoin is constantly being improved, making it more secure and efficient. This makes it a more attractive investment for long-term investors.
- Demand from institutional investors: Institutional investors are increasingly starting to invest in Bitcoin. This is because they see Bitcoin as a store of value and a hedge against inflation.
However, there are also some factors that could contribute to Bitcoin dominance declining:
- The rise of new altcoins: New altcoins are constantly being created, and some of these altcoins may offer features that Bitcoin does not. This could lead to investors switching their investments to altcoins.
- A bear market: If the cryptocurrency market enters a bear market, Bitcoin dominance could decline as investors sell all cryptocurrencies, including Bitcoin.
Overall, it’s too early to say whether Bitcoin dominance will continue to rise or decline in the long term. However, the factors listed above could have a significant impact on the future of Bitcoin dominance.