At the start of April this year, bitcoin’s dominance stood at a little over half of the entire cryptocurrency market, but its dominance increased significantly to peak at 72%. However, in the past weeks, bitcoin’s share has tracked back by almost 6% to its current level of 66.3%. This can be explained by Grayscale’s Q3 report which shows that institutional investors are now diversifying their cryptocurrency positions.
In addition to bitcoin’s declining share of the total market cap, the top crypto is also registering low volumes across the board as BTC price remains bearish in the short and medium-term.
Institutional Investors Are Moving Into Other Cryptocurrencies
Bitcoin rallied since April with a few of the altcoins improving their market share. The general opinion was that institutional investors were drawn to bitcoin because it’s the most widely known, and accessible cryptocurrency. However, bitcoin price took a hit in late September and has since been struggling to even climb past $8,500.
Yesterday, the digital currency investment firm, Grayscale Investments, released its Q3 2019 report. Despite the declining prices, the investment company recorded its best quarter yet, as witnessed by a historic high of $254.9 million.
What strikes most from the Q3 report is that the institutional investors are diversifying their crypto positions unlike in previous quarters – it is no longer bitcoin-only. In Q1, for example, the investment company posted capital inflows of $42.7 million, with 73% of these inflows being from institutional investors. Crucially, however, more than 97% of the inflows poured into the firm’s Bitcoin Trust.
Partner at Placeholder Venture firm Chris Burniske noted this new trend in Grayscale’s Q3 report pointing to the fact that institutional investors purchased 2/3 of bitcoin and 1/3 of altcoins, perhaps one of the reasons why bitcoin’s dominance has dropped to 66.3%.
Nonetheless, bitcoin still managed at least $170 million of the funds despite sharing the spotlight with altcoins. However, the same cannot be said about the king crypto’s price and volume.
Bitcoin’s Volume Is Declining
Bitcoin was range-bound at the $8,300 zone last week. However, few movements have been seen this week which have pushed the price below $8,200 with some analysts predicting that there is more blood to come.
Moreover, in an elaborate Twitter thread, eToro senior market analyst Mati Greenspan pointed out that bitcoin is posting depressing volumes in general. Among the top ten popular exchanges, the volume of bitcoin traded has dropped to less than $200 million which is a significant decline compared to the $4 billion bitcoin volume seen during its peak a few months ago.
Also, bitcoin volume traded on Bakkt’s futures platform declined to just 6 BTC contracts while CME futures contracts which are doing a bit better compared to Bakkt’s registered a low volume of 9,295 BTC which is almost a four-week low. Bitcoin volume on BitMEX has also plunged significantly. As if it weren’t bad enough, there is a considerable decrease in peer-to-peer bitcoin trading as evidenced by last week’s data from LocalBitcoins. During this particular week, the volume of bitcoin traded dropped to “its third-lowest reading since August 2017” of around $41.4 million according to data provided by CoinDance.
Nonetheless, Greenspan concluded by assuring bitcoin holders that there is no reason to fret about these dwindling volumes as bitcoin is just “resting”:
“Yes, this is a giant lull in crypto volumes across the board. Let’s not forget though that bitcoin is one of the best performing assets this year. After all this action a period of stabilization is more than welcome. Bitcoin is not dead. It’s just resting.”