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November 23, 2020 @ 18:02 +03:00
So, are crypto markets consolidating? The answer is, yes and no. Bitcoin dominance, the orange coin’s share of cumulative market cap, is in the high 50s. Usually, that means a shorter list of assets that compose the bulk of the market. Not this year.
Top-five assets in the CoinDesk 20 are growing with bitcoin, but the long tail is now more fragmented than it has been since the aftermath of the 2017 bubble. (This tally includes stablecoins and other pegged assets.)
However, much of that growth is attributable to bitcoin’s price run. And in aggregate, lightly regulated derivatives contracts, traded by individuals, prop desks and liquidity providers, dwarf the CME. It would be unwise to base an institutional flippening thesis on growth in the CME alone. Better to say institutional participation is growing with the rest of the market.
One important caveat: the flows here may represent the preferences of traders more than the long-term activity of investors. The stablecoin tether (USDT, -0.01%) is on pace to grow its market cap by more than $10 billion this quarter. Some of the flows in East Asia likely represent Tether’s (USDT) march toward quote currency dominance, as traders increasingly favor it over bitcoin in crypto-to-crypto markets.
The takeaway: This bull run is indeed different from 2017, though that doesn’t mean we won’t see another peak-and-trough cycle. Signals that hint at the kinds of investors who are participating indicate we may be earlier in the cycle than we were when bitcoin hit its all-time high three years ago. Bitcoin’s history is full of narratives about upcoming shifts or regulatory change s that would change the market fundamentally. Those narratives have been overblown in the past, and they’re probably overblown now. The same is true of narratives that foretell the dollar’s demise.
Crypto Long & Short: 4 Metrics That Show How the Current Bitcoin Rally Is Different From 2017, CoinDesk, Nov 23