Bitcoin’s Dominance

Bitcoin’s dominance — or the percentage of total market capitalization bitcoin holds compared to other cryptocurrencies — is expected to continue into 2025, according to JPMorgan analysts.

“We expect bitcoin’s dominance over Ethereum and other alternative tokens to continue this year for several reasons,” JPMorgan analysts led by managing director Nikolaos Panigirtzoglou wrote in a report on Wednesday. Bitcoin’s dominance is currently near 55% as the world’s largest cryptocurrency trades close to $100,000, according to The Block’s Data Dashboard.

The Eight Factors

JPMorgan analysts identified eight key factors that could drive bitcoin’s continued dominance:

1. Digital Component of Debasement Trade: Bitcoin’s narrative alongside gold continues to attract significant inflows into spot bitcoin ETFs from retail and institutional investors. In contrast, spot ether ETFs have seen subdued interest, suggesting limited demand for future altcoin ETFs.

2. MicroStrategy’s Acquisition Plan: MicroStrategy is only halfway through its $42 billion bitcoin acquisition plan, providing further momentum for the cryptocurrency.

3. Government Accumulation: Future crypto reserve accumulation by U.S. states, governments, or central banks is likely to focus solely on bitcoin, further boosting its position.

4. Layer 2 Network Advances: Advances in Bitcoin’s Layer 2 networks enable it to support smart contracts, challenging platforms like Ethereum.

5. Shift to Private Blockchains: Institutional blockchain applications are increasingly moving to private or consortium blockchains, which offer privacy and customization, thus reducing the appeal of public blockchains like Ethereum for large institutions.

6. Prioritizing Infrastructure: Emerging projects prioritize infrastructure development over token issuance, marking a shift from token-centric strategies of the past bull market, with some projects gaining traction without launching a token.

7. Declining User Activity: Many decentralized projects that experienced early success saw declines in user activity and token value as the hype faded, highlighting the need for enduring utility.

8. Regulatory Uncertainty: While clearer and more crypto-friendly U.S. regulations could enhance the appeal of non-bitcoin tokens, it remains uncertain how much these changes would integrate crypto into traditional finance.

The crypto market is currently in a consolidation phase while waiting for regulatory clarity from the new U.S. administration. However, the focus may initially be on tariffs and immigration, potentially delaying the emergence of regulatory policies and prolonging the consolidation phase, making the market sensitive to tech sector movements.