Bitcoin market dominance is at its highest level in years
Bitcoin continues to advance towards all-time highs only reached earlier in 2024, although the volatility the token has experienced in the run-up to the US presidential election has been high compared to previous periods of the year. Regardless of the volatile rise, the fact remains that Bitcoin price and Bitcoin interest continue to move in positive directions despite short-term setbacks. Along with growing interest and investment in the crypto sector from both major political parties, the crypto sector has seen a rise in prices, trading volume, and investor confidence. As has happened in previous bull markets, a rising tide in the crypto sector as a whole has led to the reestablishment of Bitcoin’s dominance and leadership.
Specifically, the share of total market capitalization captured by Bitcoin, used to determine Bitcoin dominance, has increased to about 60% in October 2024, which is the highest level since April 2022. After the overall decline in cryptocurrency prices in 2022 – and its lowest level with the collapse of FTX in November 2022, bitcoin’s market share continued to increase steadily since these events. Aside from the market capitalization aspect of market leadership, it is worth highlighting that institutional flows and interest in crypto have continued to be significant. centered around bitcoin. For example, although Bitcoin and Ether currently offer spot ETF products, Bitcoin ETFs have attracted $18.9 billion, while Ether ETFs have attracted a significantly smaller amount.
Considering all of this, investors might be surprised to learn of several other major developments in the crypto sector. Let’s take a look at some of the headlines that market observers might have overlooked.
Stablecoins continue to progress
With the rising price of Bitcoin, continued inflows into spot Bitcoin ETFs, and the fact that legislation has been proposed in favor of a strategic Bitcoin reserve, it would be relatively simple for investors and policymakers to relegate stable coins in the background. However, this would ignore a part of the crypto-asset sector whose market capitalization continues to grow, but also ignore a potential on-ramp for millions of new crypto users.
USDT and USDC continue to dominate the stablecoin sector, with the former maintaining its position as the largest and most commonly used stablecoin and the latter continuing to rank among the most trusted cryptoassets in the TradFi community. Despite doubts related to business models, the ability of issuing institutions to withstand higher interest rates and the looming potential of CBDC stablecoins continue to represent the crypto of choice for users looking to use crypto as a means of exchange, as a surpass crypto for non-expert investors and as the crypto of choice for TradFi institutions seeking exposure in the crypto space.
These facts exclude the fact that PayPal, a well-known payment processor in the United States and abroad, launched a stablecoin and allows individuals and merchants to buy, sell and hold cryptoassets, including including PYUSD.
ETF Taxes Will Cause Headaches
Spot crypto ETFs were a focus of crypto advocates, investors and entrepreneurs and the approval of bitcoin and ether ETFs in the same calendar year was – rightly – seen as a major win for the crypto industry. cryptography. That said, Bitcoin spot ETFs introduce several tax considerations unique to the cryptocurrency and its classification by tax authorities. With a Bitcoin spot ETF, investors may face capital gains taxes when they sell shares, as is the case with other ETFs. However, because the ETF holds actual Bitcoin, additional complexity arises with respect to tracking the cost basis for the fund’s transactions, especially as upcoming changes to the IRS code make reporting and crypto tax compliance both more complicated and more expensive.
Another challenge is the taxation of in-kind redemptions, where Bitcoin could be delivered directly to investors, thereby triggering taxable events. Additionally, frequent Bitcoin price fluctuations can lead to short-term capital gains, which are taxed at higher rates than long-term gains. Additionally, investors should consider the implications of international tax laws if the ETF is traded abroad, as crypto regulations and tax treatments vary by country.
Bitcoin centralization could harm in the long term
One of the most under-discussed trends of the recent crypto bull market has been how the centralization of crypto, and bitcoin in particular, has continued unabated and how it has accelerated in many case. Even though announcements and launches of Bitcoin-related or even Bitcoin-adjacent products and services drive the price per token to higher levels, the reality is that Bitcoin supply, Bitcoin sentiment, and the crypto market as a whole continue to centralize.
This reality is punctuated by actions taken by nation states such as El Salvador and Bhutan, both of which are accumulating strategic bitcoin reserves, initiatives by global financial services leaders such as Blackrock and Fidelity in the bitcoin space, and the appetite for bitcoin tradable products. completed for investors. Centralization will always be an element of mass market adoption, but proponents of nation-state strategies for bitcoin should be wary of undermining any of the fundamental principles and appeal of the asset.
Bitcoin has once again become the leading crypto asset, but these levels of dominance may overshadow important trends for crypto investors.
