Initiating the digital asset era has a few benefits that Bitcoin (BTC USD), the original cryptocurrency, has been enjoyed for quite some time. Market dominance was one of them, and, seen as a safe haven across multiple market cycles, BTC enjoyed the lion’s share of over 50% of the market until competition – the rest of the crypto ecosystem – picked up.
Bitcoin dominance is often associated with stability in the crypto market, where investments are focused on the native cryptocurrency and investor confidence in BTC is high. So it is no coincidence that just weeks before the collapse of the Terra ecosystem in April 2021, BTC fell below 50% dominance and remained between 40% and 50% as the crypto market weathered the Celsius, 3AC and FTX collapses.
Now, after two years of tumultuous market activity, Bitcoin has steadily increased its market share since the start of 2023, surpassing 50% dominance in June, putting BTC’s market cap above the rest of the cryptocurrency industry combined. This is why.
#1. No BTC Mention in SEC vs. Binance and Coinbase Lawsuits
The Securities Exchange Commission (SEC) has filed lawsuits against leading cryptocurrency exchanges Binance (BNB USD) and Coinbase (NASDAQ: COIN) last month. The allegations revolved around the accusation that these crypto exchanges were offering various altcoins as unregistered securities. Should the SEC’s lawsuit prove successful, altcoins could face more regulation and a shift to offshore and decentralized trading.
The lawsuit made no mention of the two largest cryptocurrencies, BTC and Ethereum (ETH USD). As a result, Bitcoin’s dominance has seen a surge as the case caused investors to move their investments from altcoins to Bitcoin, making it a safe haven again.
#2. Bitcoin ETF from Blackrock
The world’s largest asset manager with $9 trillion under management, BlackRock (NYSE:BLK), recently applied for a Bitcoin exchange-traded fund (ETF), an investment vehicle that tracks the value of an underlying asset. The SEC has previously rejected several mock ETF filings citing concerns over Bitcoin price manipulation. Nevertheless, approval doesn’t seem far off as BlackRock has an ETF approval rating of 99.83% and the filing includes a supervisory sharing deal that could eliminate the risk of market manipulation.
Eric Balchunas, the senior ETF analyst at Bloomberg, called the future BlackRock Bitcoin ETF “the real deal,” stating that it’s not much different from GLD, the SPDR Gold Shares ETF (NYSEARCA: GLD), which tracks the price of gold by holding physical gold in its portfolio. Will Clemente, co-founder of Reflexivity Research, exemplified GLD’s massive bull run, which began with its launch, as a potential price move for BlackRock’s Bitcoin ETF.
#3: Buy the Rumor: Fidelity’s Crypto Action
Fidelity, the world’s third-largest asset manager, with $4.24 trillion under management, has been mining Bitcoin since 2014 and is also rumored to have plans to make an impactful move into the cryptocurrency markets. It is suggested that the company is expected to make a buyout offer for Grayscale, the fund manager that manages the Grayscale Bitcoin Trust (OTC: GBTC), and/or launching its own mock Bitcoin ETF.
Grayscale has been trying to convert the GBTC into a spot Bitcoin ETF for years. The conversion request was rejected by the Securities Exchange Commission (SEC), leading to Grayscale suing the agency in June 2022, alleging that the regulator acted arbitrarily in rejecting spot Bitcoin ETFs despite previously approving Bitcoin Futures ETFs.
#4: Bitcoin innovation is on the rise
While Bitcoin’s price action was at its peak for some time, developers never really stopped exploring the infrastructure of the original blockchain. After a 2021 privacy update enabled data storage on the Bitcoin network, ordinal inscriptions resembling NFTs began appearing on the same infrastructure.
Although controversial, Bitcoin Ordinals clearly showed that there is still a lot to discover in Bitcoin in terms of innovation and the search for new horizons.
Another front for Bitcoin-driven innovation was discovered when Stanford University professor David Tsè and his team’s research revealed a “natural synergy” between Bitcoin and Proof-of-Stake (PoS), the mechanism primarily used by the Ethereum-based DeFi ecosystem, and emphasized that developers can focus on building applications using Bitcoin’s unparalleled liquidity pool.
Instead of the vast network of miners that maintain the Bitcoin blockchain, PoS-based blockchains are powered by the staking mechanism. Cosmos-based blockchain Babylon (where Professor Tsè serves as CTO) aims to strike an ideal middle ground between Bitcoin and the DeFi world by using the former as a timestamping service to provide better security for important transactions and resistance to censorship.
Bitcoin’s recent resurgence to more than 50% market dominance bolstered investor confidence in the asset as a safe haven. While it can be linked to multiple factors, what’s more important is what lies ahead. The ETF filings by the world’s largest asset managers indicate that retail investors aren’t the only ones who trust Bitcoin. Coupled with growing innovation, Bitcoin has the potential to welcome another wave of mass adoption.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.