A growing short-term bias conflict in the Bitcoin market led traders to look for ways to compete with crypto assets.
The Bitcoin Dominance Index, which compares the flagship cryptocurrency’s market capitalization to the rest of the crypto market, fell to its two-month low on Friday. The index’s downward movement was evident when traders pumped the altcoin market up to $ 25 billion. By comparison, Bitcoin attracted around $ 14.77 billion over the same period.
The last capital shift came when Bitcoin did not hold above $ 38,000 for the third time in less than a month.
Many traders were expecting a broader price move towards $ 40,000 with a primary upside target lurking around the previous record high near $ 42,000. However, a stronger US dollar and prospects for a faster recovery in the US economy kept safe haven demand weak, which limited Bitcoin’s profits.
The BTC / USD exchange rate fell below $ 38,000, making intraday lows near $ 36,000. The flat structure caused traders to look for other options, resulting in massive short-term pumps in the altcoin market.
The main beneficiary was the decentralized financial sector.
Almost every top token listed under the ‘DeFi’ brand name has benefited from Bitcoin’s stagnation in the past 24 hours. These included AAVE, a decentralized lending platform whose token is up 19 percent, and Maker, a permissionless lending platform responsible for creating the stablecoin DAI, whose token MKR is up 35 percent.
Other DeFi tokens that logged wild rallies are LINK from Chainlink (+ 11.56%), SNX from Synthetix (+ 14.60%) and COMP from Compound (+ 20%).
Data provided by DeFi Pulse showed an increase in the total value locked across the DeFi pools. It hit a record high of $ 33.549 billion this Friday, confirming that more traders have locked their crypto assets in the smart contracts for attractive short-term returns.
Most of these liquidity pools allow users to deposit altcoins that are outside of DeFi’s jurisdiction. This includes Ethereum’s ETH, which has recently hit an all-time high after its influx into the DeFi pools triggered a supply crisis on the spot exchanges. The token rose 1.67 percent on Friday.
Other traditional altcoins also rebounded, with Ripple’s controversial token XRP up 15 percent and Cardano’s ADA up 18 percent.
The higher valuations in the altcoin markets sparked fears of a possible dump among some analysts. For example, Bitcoin evangelist Vijay Boyapati warned of the 2018 scenario, when an aggressive upward trend in the cryptocurrency market later led to a capitalization decline of more than 95 percent.
“Many altcoins from previous cycles have gone to zero,” said the author of “Bullish Case for Bitcoin”. “I think most will be in this cycle. Maybe not all, but in the long run the relative market capitalization Bitcoin will resort to something small. It always increases with speculative passion and stupid money. “
In the meantime, Erik Voorhees, CEO of ShapeShift, stated that all cryptocurrencies would trade higher because “the entire industry is growing together and not mutually exclusive”.