When altcoins go down and market starts to slump, there has been a trend that cryptocurrency investors and traders flock to the first every cryptocurrency – bitcoin.
This is a trend that we have been observing ever since altcoins started garnering fair share of attention as well as investor money. While altcoins have gained a lot in terms of dollar pricing over the last couple of years, bitcoin and ethereum tend to be the main cryptocurrencies that investors and traders fall back to at the time of market slump.
The dominance index of bitcoin, which calculates the dominance of the cryptocurrency over the global market, has increased over the past 48 hours amidst one of the worst corrections the market has experienced since June 2017.
Since the emergence of altcoins, investors have been equating bitcoin as a sort of reserve cryptocurrency that they can fall back to at times of market slump or when altcoins lose considerable value. Bitcoin doesn’t always guarantee profitability owing to a number of market forces, it does have a stability factor that other altcoins don’t.
Throughout 2017, both Ripple and Ethereum outperformed bitcoin in annual returns. Ripple led to a 330x return, while Ethereum recorded a 100x increase in price. Bitcoin ended the year with a 15x increase in value. On January 15, a major correction hit the cryptocurrency market and the vast majority of cryptocurrencies in the market plunged in value. The valuation of all cryptocurrencies in the market declined from $700 billion to $420 billion, by more than $280 billion.
Throughout the correction, the dominance index of bitcoin, which declined to an all-time low in early January, surged from 32 percent to 38 percent, as alternative cryptocurrency investors reallocated their funds into major cryptocurrencies like bitcoin and Ethereum. Consequently, bitcoin and Ethereum experienced a relatively small decline in value, in contrast, other cryptocurrencies in the market.