The bitcoin dominance index has fallen below 50 percent for the first time since October, as alternative cryptocurrencies in the market such as Ethereum, Litecoin, and Ripple demonstrated strong performance over the past week.
After a week-long rally, Ethereum, Litecoin, Ripple, Cardano, IOTA, Dash, NEM, and EOS, all of the top 10 cryptocurrencies with the exception of bitcoin and Bitcoin Cash, have recorded a daily gain of over 10 percent.
Earlier this week, CCN.com reported that Litecoin and Cardano have both demonstrated more than 150 percent increase in value within a seven-day period. Since then, both Cardano and Litecoin have surged by nearly 20 percent.
Throughout this week, many analysts have provided contrastic viewpoints in regards to the rise of altcoins. Some have claimed that the entrance of institutional money and hedge funds in the cryptocurrency market initially by bitcoin futures have led investors to explore other cryptocurrencies in the market.
Others have attributed the success of altcoins to the scalability issues of bitcoin and the lack of Segregated Witness (SegWit) integration by businesses. Leading wallet platforms like Blockchain and Coinbase, along with bitcoin transaction fee prediction platforms have been recommending a transaction fee in the range of $10 to $30, due to the state of the bitcoin mempool, the holding area of unconfirmed transactions.
Willy Woo, a highly regarded cryptocurrency analyst and researcher, noted that while SegWit has improved the Bitcoin blockchain in terms of scalability and block size expansion, SegWit will need to reach a high adoption rate to substantially lower the transaction fees of bitcoin. Woo wrote:
“Now that Segwit is out, bitcoin blew past the 4 transactions per second ceiling and tipping 5.5 transactions per second. But judging on past organic growth, the true demand is over 10 transactions per second right now. If Segwit was fully adopted, the network would be able to handle this estimated 10 transactions per second of demand easily. Hardly any of the major exchanges have adopted Segwit. IMO they have the biggest power right now to quickly alleviate congestion.”
However, only a few major bitcoin platforms including Trezor, Ledger, ShapeShift, and BitGo have integrated SegWit, and larger wallet platforms such as Coinbase and Blockchain are yet to implement SegWit.
In the short-term, the lack of a scaling solution and slow adoption rate of SegWit will continuously lead to high transaction fees, unless the mempool clears.
The public and investors in the cryptocurrency sector have begun to take interest in tokens and cryptocurrencies that are able to carry operations and process transactions bitcoin is not capable of.
For instance, Litecoin’s faster confirmation times allow the facilitation of small payments with lower fees. Dash, Monero, Zcash, and Verge’s privacy measures enable users to process anonymous transactions that cannot be tracked through public blockchain explorers.
Whether the trend of alternative cryptocurrencies rising and bitcoin sustaining its value will continue in the mid-term remains uncertain. In July, bitcoin’s dominance index was also below 50 percent, as the popularity of Ethereum surged. Throughout August and September, bitcoin’s dominance index recovered, peaking to 62 percent.
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Last modified: March 4, 2021 5:02 PM