Bitcoin Reclaims Blockchain Dominance Post-Halving, BTC Sliding
Bitcoin’s blockchain bandwidth use exceeded 90% post-halving, powered by new token standards and increasing transaction volume. This surge signals increased network activity. Despite encountering an ‘extended level’ of Fear, Uncertainty, and Doubt (FUD), Bitcoin’s adoption rate, transaction, and trading activity remained unmoved.
Dune Analytics user Cryptokoryo’s chart displayed the defining moment on June 20, where Bitcoin’s 91.4% dominance out-powered 6.8% for Runes, 1.6% for BRC-20, and 0.2% for Ordinals in the transactional share.
Runes Powered The Improvement
The surge in bandwidth use after the halving can be mainly attributed to the adoption of new token standards, such as BRC-20 and Runes. Dune Analytics data shows considerable growth in both token standards, mainly on April 23, 2024, when Runes transactions surpassed 750,000.
New Token Standards
While speaking to reporters, Bitfinex analysts highlighted that:
“New token standards such as BRC-20 and Ordinals have also contributed to more incentivization to build on BTC rather than other chains as the Bitcoin ecosystem keeps gaining more mindshare.”
Runes were created to establish fungible tokens on the BTC blockchain and they gained massive traction, resulting in increased transaction volume.
Coupled with the adoption of BRC-20 tokens, the rise of more complex transactions and BTC blockchain interaction considerably increased the chain’s bandwidth load.
Post-Halving Effect
The recent April BTC halving event, which cut block rewards for miners by 50%, pushed miners to prioritize transactions with higher fees to compensate for the slashing of rewards.
On the topic of the halving event’s effect on the Bitcoin blockchain, Bitfinex analysts told reporters:
“[After] the halving event, there is typically heightened on-chain activity. Traders and investors adjust their positions, leading to more transactions being broadcast to the network.”
The normal pattern resulted in a growing number of transactions getting processed and powered momentum to the consistent surge in Bitcoin’s blockchain bandwidth use.
Why Is BTC’s Price Down Today?
On June 21, Bitcoin was struggling and dropped to its lowest in over a month, because of the outflows from BTC ETFs and a drop in market dominance as altcoins gained momentum. Its 2.3% plunge pushed BTC to $63,500.
Spot Bitcoin ETFs Outflows Resumed
Bitcoin’s price drop came after days of outflows from its U.S.-based spot ETFs. Interestingly, the investment vehicles have seen almost $500 million in withdrawals since June 10.
These ETF outflows coincide with a surge in the US dollar’s strength compared to several top currencies, highlighting an increasing risk-off mood among investors. This comes after mixed macroeconomic data from the US and the Fed dropping its possibility of rate cuts from four to only one in 2024.
An increased interest rate scenario helps reduce the opportunity cost of holding riskier assets such as cryptos, a sentiment that seems to have burdened Bitcoin priced down recently, including the latest plunge.
Bitcoin’s Market Dominance Drops
Bitcoin’s recent losses coincide with its dropping share in the crypto market.
Interestingly, the Bitcoin Dominance Index (BTC.D), which measures Bitcoin’s market cap versus the rest of the crypto market, lost 0.55% to 55.14% on June 21. This is a continuation of its drop from the local top of 56.29% established on June 18.
On that note, most investors have rotated their capital out of the Bitcoin market seeking opportunities in altcoins, specifically in the wake of the U.S. Securities and Exchange Commission’s (SEC) decision to end its investigation into Ethereum, the top altcoin by market cap.
The trends are also seen among institutional investors, with the CoinShares weekly report displaying investors withdrawing capital from Bitcoin-based investment funds but increasing their exposure to the altcoins, mostly Ether. CoinShares wrote:
“The outflows were entirely focussed on Bitcoin, seeing US$621 million outflows, the bearishness also prompted US$1.8 million inflows into short-bitcoin.”
Is It A Technical Correction?
Bitcoin’s losses are part of a widespread correction happening within its current bull flag pattern. Remarkably, bull flags are bullish continuation patterns characterized by two downward-sloping, parallel trendlines after a huge upside movement. As a rule of technical analysis, the pattern resolves after the price surges above the upper trendline and gains up to the height of the past upside movement.
As of June 21, Bitcoin’s price was pulling back after it tested the upper trendline of its bull flag pattern, targeting another plunge toward the lower trendline below $60,000, which it might hit by the end of June.
Nevertheless, Bitcoin’s general bias is skewed to the upside, targeting a breakout above the flag’s upper trendline at about $72,000 in case the technical pattern plays out as expected. If that happens, Bitcoin’s bull flag target will hit around $88,000 by July or August 2024.
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