If this happens, Bitcoin may enter a new bull market: CryptoQuant

Bitcoin (BTC) has made huge gains recently, but that doesn't mean the market is ready for a full bull run.

On-chain patterns analyzed by CryptoQuant Quicktake author Woominyu show that Bitcoin has seen its market share dominance decline as the previous bull markets began. Unfortunately, the opposite is true now.

Diversifying investor capital

According to Woominyu, the decline of Bitcoin's dominance is causing investors to divert their money into altcoins and other cryptocurrencies in addition to BTC. In other words, the market needs to experience the altcoin season before BTC can experience the bull run.

As investor capital moves from BTC to altcoins, the broader market could witness a massive rally that could trigger a bull run. Woominyu said BTC could witness a new bull run if its dominance declines.

“Looking at this chart, we see that historically, major bull runs in the market have been associated with a decline in Bitcoin's dominance. If this pattern repeats, we can expect a new crypto bull market to begin as Bitcoin's dominance declines,” the analyst said.

Bitcoin's dominance is increasing.

Bitcoin's dominance has been increasing over the past week. According to data from CoinGecko, the leading cryptocurrency accounts for 54.7% of the total market share as of October 24. However, at the time of writing on November 1, the stake had risen to 58.2%.

The last time Bitcoin dominance reached this level was in 2018. It rose to 64.8% on August 5, when the yen-dollar crisis saw the bloodshed of millions. A more sustained rise in Bitcoin dominance was seen in March 2021, the last bull cycle. For six months prior to that, the property's market share had been above 60%.

Considering Woominyu's analysis, BTC dominance must fall before the asset witnesses another bull run. However, this may take some time as the Bitcoin network is seeing a large influx of capital.

The launch of spot Bitcoin exchange-traded funds (ETFs) in the United States and many other markets has paved the way for traditional financial investors and institutions to gain access to the world's largest blockchain network. These funds, particularly US ETFs, have posted substantial gains since October. This continued flow of capital has pushed the price of BTC above $73,000 for the first time since March.