There Is Bitcoin, Then There Is Everything Else
Cliff-Notes:
• Bitcoin dominance has surged to 64%, the highest level since February 2021, signaling a fundamental shift as altcoins are failing to capture retail speculation like in previous cycles.
• The breakdown of the historically loose inverse correlation between bitcoin dominance and price confirms that institutional and sovereign capital flows are prioritizing bitcoin over the broader "crypto" market.
• With last week's record-breaking $2.16 billion in "crypto" liquidations led by Ethereum, the leverage-driven altcoin casino is collapsing, reinforcing the separation between bitcoin and the rest of the space.
For over a decade, every bitcoin bull market followed a familiar script. Bitcoin would rally, liquidity would spill over into altcoins, and a speculative frenzy would send everything higher—regardless of merit.
Not this time. That era is over.
Bitcoin dominance just hit 64%—its highest level since February 2021. Historically, altcoins would rise alongside it, capturing the mania of retail investors looking for outsized gains. Instead, they’re getting obliterated.
The historically loose inverse correlation between bitcoin dominance (in white) and bitcoin price (in orange) has flipped into a strong positive correlation, as seen in the bottom pane. This is the first time in history that bitcoin’s share of the total digital asset market is rising while its price is climbing. In past cycles, retail-driven speculation pushed bitcoin’s price up and later funneled money into altcoins, causing bitcoin dominance to decline. That dynamic is gone.
This cycle, institutions, sovereigns, and long-term holders are leading the charge, increasingly allocating capital exclusively to bitcoin while largely ignoring the rest of the market.
Note the loose negative correlation during the last cycle through 2023 is gone, with a strong positive correlation in its place. This is the most substantial development for cross-asset correlations in bitcoin's price history—it demonstrates bitcoin finally being understood for what it is rather than what it trades like, and the market is starting to distinguish it from "crypto" at the atomic level. Price is truth:
Last week, we witnessed the single-largest liquidation event in "crypto" history; bigger than the 2017 cycle top, the COVID collapse, and the summer-fall 2022 Celsius/BlockFi/Genesis/Voyager/FTX unwind. Over 24 hours, there were $2.16 billion in liquidations, led by Ethereum with $573mm in liquidations:
The largest single liquidation was a $25.6 million ETH/BTC order on Binance, and as you might have guessed, ETH/BTC is not having a great time. It is now trading at 0.026—the lowest level for ETH/BTC in over three years.
The truth that was hinted at in 2022 and understood for years by bitcoin-only allocators is finally realized in the price action: the entire non-bitcoin "crypto" market is merely a digital casino propped up on extreme 50-100x leverage. All of it wiped out in an instant when price moved against them.
This wasn’t your standard technical correction, it marks the start of an extinction-level event for altcoins. ETH/BTC, the standard measure of altcoin dominance, hasn't seen a new high in 3 years and has been on life support for 2.5 years.
Altcoins have survived purely on narratives. Ethereum was supposed to be “ultra-sound money.” Solana was “high-speed finance.” DeFi would “replace banks.” Each cycle, a new batch of narratives emerged, promising world-changing innovation. None of them lasted.
Bitcoin, on the other hand, doesn’t need a narrative. It doesn’t need marketing or hype. It exists, and it thrives because it was built to do one thing—protect wealth in a world of perpetual monetary expansion. Its monetary properties allow it to do this very specific thing better than an asset in the known universe, therefore it appreciates in the face of inescapable, perpetual monetary expansion. Bitcoin does what it says it can do, and it doesn't need a marketing department or fresh narratives on a regular basis to convince people of it.
Ethereum is the latest example. A change to its monetary policy, called the merge. was designed to make ETH deflationary—yet issuance has been accelerating for 10 months straight. Since the merge, ETH’s total supply has increased by 13,516 ETH; more abundant than when its supply rules changed to become deflationary. The "ultra-sound money" narrative is dead:
Altcoins have relied on marketing and hype to stay afloat. Bitcoin, in contrast, doesn’t need a constant stream of narratives to sustain its value. It remains the only asset, not only in this space but in the world, with an immutable monetary policy and a fixed supply.
This is the first bull market in history where bitcoin dominance is rising instead of falling, a confirmation that the broader market is realizing that bitcoin is fundamentally different from everything else.
The results are clear: during the liquidation, ETH/BTC fell 8.4%, XRP/BTC fell 9.3%, and most every other altcoin fared even worse. Retail speculation can no longer prop up altcoins relative to BTC. When the leverage gets flushed, nothing remains.
This shift isn’t just happening in markets, it’s happening in policy, too. During the White House Crypto Working Group’s first press conference, Senator John Boozman made it clear by saying, "some digital assets are commodities, some are securities."
Translation? There is bitcoin, then there is everything else.
And in a stunning shift, the White House AI & Crypto Czar David Sacks confirmed that his working group is now evaluating the viability of a Strategic Bitcoin Reserve—a major linguistic shift from the former "National Digital Asset Stockpile" moniker that was used in Trump's executive order on the matter. This is a major development; an admission that bitcoin is functionally and fundamentally incomparable with everything else that pretends to be the next evolution of it, and an asset whose properties allow it to be a reserve asset on par with gold.
This language shift is monumental. A few years ago, the U.S. government was openly hostile toward bitcoin. Today, they’re discussing stockpiling it.
For the last decade, altcoins functioned as a casino, fueled by leverage and financial nihilism. As the market's new institutional players are funneling their capital into bitcoin, and it becomes clear that your odds of a winning lottery ticket are better at the local gas station, the altcoin casino is now collapsing.
Bitcoin is proving it doesn’t need an “alt season” to thrive. It doesn’t need speculative excess to drive demand. It is the demand. This is the most important bull market in bitcoin's short history. The separation between bitcoin and crypto is happening in real-time; an overnight paradigm shift, 16 years in the making.
The Next Major Squeeze
On Monday, the funding rate on perpetual futures went deeply negative, creating the largest net short gap since bitcoin was at $23,000 in August 2023.
This means that, structurally, the risk is shifting from downside BTC liquidations to upside BTC liquidations. While last week’s leverage flush wiped out most long positions, the next major move could be the opposite—an explosive rally fueled by forced short liquidations.
Traders who overextended their leverage to short bitcoin will eventually have to buy it back when the price moves against them, just like overleveraged longs were wiped out last week. Bitcoin is coiled. The stage is being set for a potential short squeeze. The longer this dynamic of short dominance persists, the greater the risk of a forced shirt liquidation cascade that sends bitcoin's price higher with force:
Take it easy,
Joe Consorti
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