Bitcoin’s Continued Dominance Highlights Future Trends For Crypto

Even with multiple challengers to its reign atop the crypto market, and the FTX trial providing daily fodder for crypto skeptics, bitcoin has reached market dominance levels not seen in months.

The cryptoasset market has had a tumultuous time since many tokens reached all time highs during 2021, with the tumult hopefully ending with the ongoing trial of Bankman-Fried and FTX at large. Even with these headlines dominating the media conversation around cryptoassets, there is a very important trend that has surprisingly flown under the collective radar; the return of bitcoin dominance and leadership in the marketplace. To non-expert users and investors this might sound strange, as bitcoin dominates most every conversation connected to crypto, be they driven by either retail investors or institutional investors. The reality, however, has been different with many calls for the end of bitcoin dominance been repeated in various iterations.

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Forecasts following the EthereumETH upgrade tended to center around the seemingly unavoidable rise of the Ethereum community and Ether as the successor to bitcoin as the leader of the crypto community. Decreased power utilization of 99%, being the foundational layer for most Layer 2 applications including stablecoins, NFTs, and smart contracts, and trading at levels that make using ETH for purchases more palatable than spending BTCBTC all are strong arguments. In addition to ETH, stablecoins have also been heralded as the next leaders of the cryptoasset space, with recent entrants to this subsector including PayPalPYPL, a household name to many potential U.S. crypto users, as well as many international potential users.

Despite that, bitcoin continues its reign as the most influential, largest, and most widely traded cryptoasset. Let’s take a look at what that might mean for crypto development as 2023 wraps up.

Bitcoin Is An Asset Class

The fact remains that even though bitcoin was originally created as a transactional medium the reality is that bitcoin is treated as an asset class, with over 50% of bitcoin having not moved for over a year. Coupled with the institutional desire to see bitcoin products approved and start trading reinforces the fact that bitcoin is increasingly viewed as an asset class, and that bitcoin continues to separate itself from the slew of other tokens projects that have flooded the marketplace in the last several years reinforces this trend.

Implications of this are significant, and will have direct and indirect ramifications for the wider crypto space at large. Firstly, this all but assures that stablecoins will continue to make inroads as both a medium of exchange as well as how most institutions and entrepreneurs gain exposure to cryptoassets. This also means that options such as PYUSD, and the potential of state issued stablecoins (such as the Wyoming stable token project) will continue to play outsized roles in how implementation, perception, and cybersecurity around cryptoassets evolve.

Bitcoin, both in perception and impact as how crypto is used on an everyday basis, will continue to drive headlines, but will take a backseat to TradFi driven projects.

The Number of Tokens Will Drop

Something that has been discussed quite a bit recently in the NFTNFT space, that 95% of the current marketplace might be worthless, is also something that can be applied more broadly to the cryptoasset space. Following the initial excitement around bitcoin in 2017, there was a deluge of token projects that were launched, with predictable results; scams of all kinds and other types of unethical activity have dominated headlines for years at this point. With the era of cheaper money coming to an abrupt close during 2022 this has only increased the pressure on marginal projects and tokens.

Despite the nearly endless stream of bad news and negative headlines around crypto, including the detailed revelations around what happened at FTX, bitcoin has been surprisingly steady and increased its share of market dominance. As the crypto market continues to mature has to contend with both higher-for-longer interest rates and more competition from the TradFi space, and the potential of government backed tokens, investors will continue to look for value.

Cryptoassets are financial instruments at the end of the day, and investors of all stripes will continue to look for assets that have fundamental value; bitcoin continues to satisfy that demand.

Transparency Will Rise In Importance

No matter the opinion of certain crypto advocates for a loosely regulated future the reality is that compliance, rules and standards will drive the health and sustainability of crypto going forward. Be it the rise of stablecoins issued by TradFi organizations, the multiple submissions for ETFs by large asset managers, or the launching of tokenized platforms by several of the largest banks in the U.S., the message is clear. Cryptoassets are here to stay, but there is not going to be room for the tens of thousands of tokens that currently exist to stay liquid.

As large institutions of all kinds invest significant capital into developing these projects, and seek to recommend that clients do the same, the transparency and legitimacy of these products and services must beyond reproach. This means that reporting, disclosure, custody practices, and compliance must be at the forefront of cryptoassets moving forward. Bitcoin yet again seems to be fulfilling this role, with spot ETFs filed by trillion dollar asset managers focusing on bitcoin at the exclusion of all others.

Bitcoin has long been the leader of the crypto market, and it’s continued dominance is good for both bitcoin investors and the crypto sector at large.

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