As the U.S. government decided to increase the scale of long-term Treasury buybacks (Buyback), bitcoin prices surged, prompting analysis that the virtual asset market has begun a bull run. Judging by the Bitcoin Dominance indicator, known as the alarm bell of the coin market, it appears to be the early stage of an uptrend.

Bitcoin dominance means bitcoin's market clout and refers to bitcoin's market cap relative to the total virtual asset market cap. For example, if the total coin market cap is 100 and bitcoin's market cap is 50, bitcoin dominance is 50%.

A screen at the Bithumb Lounge in Gangnam District, Seoul displays the price of Bitcoin surpassing 100 million won per coin. /Courtesy of News1

According to CoinMarketCap, a virtual asset market data site, as of midnight that day bitcoin posted a 23.5% gain over the past week. Ethereum, the leading altcoin (Altcoin, all virtual assets except bitcoin), rose 30% over the week. During the same period, bitcoin dominance rose 1.2 percentage points (p) to 59.6%.

CoinGlass, a virtual asset data analytics firm, analyzed about 10 years of bitcoin dominance data and found a pattern that appears in the early phase of an up cycle when bitcoin's price and dominance rise together.

Graphic = Son Min-gyun

If bitcoin's price rises but bitcoin dominance falls, it signals money is flowing into the overall virtual asset market and indicates an altcoin season. Typically, when bitcoin dominance approaches 60%–70%, the figure then declines again and an altcoin rally often follows.

When bitcoin's price and bitcoin dominance fall together, it is read as a sign that funds are leaving the virtual asset market.

Bitcoin Dominance chart. /Courtesy of CoinMarketCap

In a bull market, bitcoin dominance serves as a tool to gauge profit-taking timing, and in a bear market, it acts as an alarm to avoid crashes. Some say the latest rebound in the virtual asset market signals the end of the down cycle.

Ju Ki-young, head of CryptoQuant, an on-chain (Blockchain network) analytics firm, said, "The current bitcoin trend is quite solid. In a bear market, when this kind of rebound appears, it is usually interpreted as a sign that a bottom has been set," and added, "There may be a temporary correction, but it seems the bear market is effectively over."

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