Photo illustration by Chesnot/Getty Images
Getty Images
The crypto market has been through a sharp reset in recent weeks, marked by broad liquidations, thinner liquidity, and a noticeable cooling of risk appetite. Bitcoin was not immune, falling from its recent highs, but it held up materially better than the rest of the market. Altcoins saw far steeper drawdowns, funding rates flipped negative across the board, and open interest dropped significantly from pre-selloff levels. In a period defined by de-leveraging and defensive positioning, capital flowed back toward assets perceived as more resilient.
That context makes the rise in Bitcoin dominance even more telling. Bitcoin’s share of the total crypto market value has been climbing not because the entire market is rallying, but because everything else has been falling faster. Dominance becomes a mirror of investor psychology during stress: a return to liquidity, depth, and assets traders trust the most. And in the current environment of macro uncertainty, cautious sentiment, and fragmented liquidity, Bitcoin is once again functioning as the market’s center of gravity.
Bitcoin Reclaims the Driver’s Seat
At Deribit, one of the largest crypto options exchanges globally, the shift is unmistakable. Chief Executive Luuk Strijers notes that Bitcoin’s rise in dominance has been mirrored almost one-for-one in derivatives positioning. “Today, over 85 percent of open interest and approximately 80 percent of platform volumes on Deribit is in BTC, roughly ten percentage points higher than in 2024,” he says. According to him, this pattern reflects a direct rotation away from altcoin speculation and toward Bitcoin hedging.
Strijers adds that falling prices amplify this behavior. “Declining prices like we have seen recently drive higher Bitcoin dominance as it is the result of a lower risk appetite and a return to core crypto assets,” he explains. As traders retreat into Bitcoin, altcoin markets experience lower open interest and thinner order books, making price discovery more difficult. This is less a warning sign and more a recurring structure of crypto market cycles. Periods of consolidation and BTC-led dominance often act as a reset, rebuilding liquidity at the base layer before confidence returns more broadly.
A Selective Market With Narrower Tolerance
Bybit, one of the largest crypto exchanges by derivatives volume, sees similar patterns across its markets. Han Tan, Chief Market Analyst at Bybit, describes the environment as one where market participants are far more selective than in previous cycles. “Bitcoin’s dominance has grown as the crypto space matures. Market participants have also become increasingly selective within the web3 space,” he says.
MORE FOR YOU
The divergence was especially clear during the recent selloff, where Bitcoin’s funding rate stayed positive while altcoins plunged. Funding rate data can be verified through open sources such as Coinglass. Tan also noted that Bitcoin’s decline from its October peak to November trough was around thirty four percent, significantly less severe than the forty five to fifty eight percent drawdowns experienced by major altcoins.
The aftermath of the October liquidation cascade still lingers; “Market participation is still noticeably subdued since the 10/10 liquidation event, with open interest for perpetual contracts still about half of pre-October levels,” Tan says. There are also encouraging signs: implied volatility has eased from its recent highs (Skew and Amberdata both show this trend), fear indicators have moderated, ETF inflows have begun to return, and even altcoin funding rates have flipped back into positive territory.
What Dominance Really Signals
Rising Bitcoin dominance is not a referendum on whether altcoins have value. It is a measure of how investors are pricing risk relative to liquidity. In a risk-off environment, the market prioritizes depth over experimentation. Bitcoin benefits from the deepest spot and derivatives markets, the most institutional access, and the strongest narrative as a macro asset. When uncertainty rises, those characteristics place it at the center of capital flows.
For altcoins, the implications are more structural. Thinner liquidity and reduced leverage mean less tolerance for speculative narratives. Projects with unproven utility will struggle to attract attention when traders are focused on capital preservation. Conversely, assets with real-world use cases, strong revenue lines, or institutional adoption paths may still perform, but the bar is higher. Rising Bitcoin dominance forces projects to demonstrate their value rather than rely on momentum alone.
Where the Cycle Might Go Next
The key question is whether this period marks another temporary dominance cycle or the beginning of a longer structural realignment. On one side, history suggests that once confidence rebuilds around Bitcoin, capital often rotates back into altcoins with renewed risk appetite. On the other side, today’s environment includes forces that previous cycles did not: regulated Bitcoin ETFs, global interest rate uncertainty, stricter compliance regimes, and more scrutiny of token economics.
Strijers believes that recovery begins with Bitcoin. “In our experience, healthier derivatives participation in BTC tends to be a precursor to improved market conditions overall,” he says. Tan echoes a similar sentiment but cautions that macro conditions still matter. Retail investors may need more reassurance from central banks and broader economic signals before re-engaging meaningfully.
Bitcoin dominance, then, is less about tribalism and more about market structure. It shows where liquidity is willing to sit, where traders feel they can manage risk, and how participants behave when uncertainty rises. As Bitcoin reclaims its leadership role, it provides a clearer signal: experimentation may return, but only after the market has rebuilt its foundation.