Bitcoin’s Market Dominance Unlikely to Return to 2020 Highs

Recent discussions in the crypto space have cast some doubt on Bitcoin's dominance and future trajectory. Analyst Benjamin Cowen is skeptical about Bitcoin's dominance returning to its previous highs, while other analysts believe Bitcoin's dominance has already peaked. Despite concerns about a possible sharp decline in BTC’s price, experts like Samson Mow are still confident in Bitcoin's resilience during market downturns. Additionally, a report by VanEck suggests Bitcoin miners could boost their revenues by transitioning part of their energy capacity to support AI and high-performance computing sectors.

Analysts Cast Doubt on Bitcoin Dominance

Crypto analyst Benjamin Cowen recently shared his skepticism about Bitcoin (BTC) dominance returning to the levels it reached in December of 2020 when the BTC’s price surged by almost 220% in three months. Cowen explained in an interview on The David Lin Report that he does not expect Bitcoin dominance to climb back to 70%. Instead, he set a target of 60%. 

Benjamin Cowen’s interview (Source: YouTube)

According to Cowen, while Bitcoin dominance tends to decline during altcoin seasons, like the one in 2021, it usually recovers slowly after a market breakdown. However, in the current cycle, Cowen believes that Bitcoin is unlikely to reach its previous dominance highs because of the growing presence of Ethereum and other cryptocurrencies.

Cowen also predicted that Bitcoin could reach the 60% dominance level as early as September or as late as December. At press time, Bitcoin dominance stands at 55.74%, after a 0.51% drop over the past 24 hours, according to data from CoinMarketCap. 

Despite this, another well-known crypto trader, Kaleo, suggested that Bitcoin dominance might have already peaked. Kaleo is confident that the current cycle's top for Bitcoin dominance was reached around 57.50%, falling short of the expected 60% predicted by Cowen. Kaleo also pointed out that the onset of a true altseason might only happen when Bitcoin dominance dips below 50%, a signal that traders often watch for as an indication to shift capital from Bitcoin to altcoins.

Cowen also stated that the landscape for Bitcoin dominance is much more complex in 2024 compared to previous cycles, especially since the stablecoin market cap was much lower in 2019 when Bitcoin dominance peaked at slightly above 71%. To better gauge the market's ”flight to safety,” Cowen recommended combining Bitcoin dominance with the dominance of the stablecoin Tether (USDT). 

Bitcoin May Dip But Bounce Back

Fear and greed very often dictate market movements in the crypto space. This then leads to many theories being created about Bitcoin's future. One such theory suggests that Bitcoin could experience a sharp decline in the short term due to a potential ”black swan” event. 

As a highly liquid asset, Bitcoin may be sold off rapidly as investors liquidate positions to cover losses on other leveraged bets. This scenario will be challenging for bulls and holders of long leveraged positions but could ultimately result in a big V-shaped recovery, propelling Bitcoin to new all-time highs.

Samson Mow, a well known advocate of Bitcoin, recently offered a positive viewpoint, and specifically pointed out the resilience of Bitcoin during severe market downturns. Mow stated that historical trends show large amounts of capital is ready to deploy when Bitcoin's price drops below $50,000. He noticed that during the last major market crash, Bitcoin quickly rebounded as soon as U.S. markets reopened, suggesting that it is unlikely for Bitcoin to fall below $50,000 in another market crash. 

Mow’s perspective is based on the market behavior during the latest crypto market crash in early August, where Bitcoin's price dropped more than 15% in a single day and reached $49,000. This was a price level that was not seen since the start of the year. The crash was driven by recession fears that caused many investors to liquidate their positions in crypto. Despite these concerns, Mow is still very confident in Bitcoin's ability to recover quickly in similar situations.

Michael Saylor’s Cryptic Post Sparks More BTC Speculation

Michael Saylor, the co-founder and chairman of MicroStrategy, has also attracted attention from the crypto community after a very simple yet impactful tweet: ”Behold Bitcoin.” Although the post is very short, the timing is turning quite a few heads considering it was posted during a period of consolidation for Bitcoin. 

Bitcoin has been consolidating below $62,000 since Aug. 8, after reaching a high of $62,755. This pause in price movement has sparked a lot of speculation about Bitcoin’s short-term trajectory. At press time, BTC is trading hands at $58.745.01 after its price dropped by 1.03% throughout the past day.

Saylor's tweet seems to encourage the market to look beyond the current consolidation phase and consider the broader implications of Bitcoin's adoption and long-term potential.

Meanwhile, crypto analyst Ali Martinez recently pointed out Bitcoin's recent drop below the 200-day simple moving average (SMA), and described it as a double-edged sword. While a dip below the 200-day SMA in an uptrend can signal a buying opportunity, remaining below it for too long could suggest the onset of a bear market.

Despite the ongoing uncertainty, on-chain analytics firm Glassnode has seen a shift in behavior among Bitcoin holders. After months of distribution pressures, there is a very noticeable return to HODLing and accumulation. However, Glassnode also pointed out that recent activity in spot markets shows a net bias toward sell-side pressure, which has yet to fully subside. Overall, this is just another indication that BTC’s next move is still very unclear and the market is stuck in a state of indecision.

VanEck Sees Big Profits for Bitcoin Miners

There is some better news for Bitcoin miners at least. Bitcoin miners could potentially generate an additional $13.9 billion in yearly revenue by 2027 if they partially transition to providing energy to the artificial intelligence (AI) and high-performance computing (HPC) sectors, according to a report by investment firm VanEck. 

The report shed some light on the synergy between AI companies, which require a lot of energy, and Bitcoin miners, who have the capacity to supply it. VanEck pointed out that many Bitcoin mining companies are facing serious financial challenges, including excessive debt, share issuance, and executive compensation. By shifting 20% of their energy capacity to AI and HPC, these miners could see some impressive financial gains, with total additional yearly profits potentially exceeding $13.9 billion on average over 13 years.

This much more positive perspective comes in stark contrast to recent criticism from Kerrisdale Capital, which labeled the Bitcoin mining industry as an ”industry of snake oil salesmen.” Kerrisdale’s chief investment officer, Sahm Adrangi, believes that Bitcoin mining firms often dilute their shares without delivering returns.

VanEck’s report also pointed out that AI companies are typically willing to provide the financial resources that are needed for capital expenditure, which could benefit Bitcoin miners entering into these contracts. 

Bitcoin miners already exploring AI/HPC plans (Source: VanEck)

Core Scientific, the fourth-largest Bitcoin miner by hashrate, recently secured a 12-year contract with AI hyperscaler CoreWeave, and is now expected to generate over $3.5 billion in revenue by supplying 200 megawatts of infrastructure. Similarly, Canadian miner Hive Digital Technologies has expanded its facilities to offer HPC services to various industries, including gaming and AI.

The report from VanEck arrived at the perfect time for Bitcoin miners after the April Bitcoin halving, which reduced mining rewards from 6.25 BTC to 3.125 BTC per block. This further squeezed profit margins for miners, which was made very clear by Marathon Digital’s second-quarter revenue of $145.1 million, falling short of analysts’ expectations. 

Additionally, the cost of mining using Antminer S19 XPs is expected to double from $40,000 to $80,000 after the halving, adding even more pressure on the industry.