Bitcoin Could Remain Behind if it Doesn’t Keep up With ETH

Bitcoin has been flat for the past three months. While many big investors have kept accumulating Bitcoin, the majority of traders and smaller investors are taking their money elsewhere.

Grayscale, one of the biggest Bitcoin trust funds in the world has been buying massive amounts of Bitcoin during 2020, however, this hasn’t translated into a boost in price.

Bitcoin is Losing Market Dominance at an Alarming Rate

The lack of price action by Bitcoin clearly made investors look elsewhere for profits. DeFi projects started to experience a notable boost in value in the past two months. Compound (COMP) was one of the most extreme examples, getting listed on Coinbase and FTX immediately and getting to almost $1 billion market cap in days.

Other coins have followed COMP experiencing massive price boosts. Elrond is another notable example with a 3,300% price explosion in just months.

The rise of DeFi projects made a lot of investors to take money out of Bitcoin and put it into new cryptocurrencies.

Initially, Bitcoin did see a decent price boost after the European Union announced a €750 billion stimulus package, however, it wasn’t enough to push Bitcoin above $10,000.

Four days ago, Ethereum had a massive breakout above $250, something that clearly helped Bitcoin but again, was not enough. Ethereum is, after all, the platform that many DeFi tokens are based on.

Most DeFi tokens are ERC-20, which means they basically depend on Ethereum.

Many times in the past, Bitcoin going up significantly meant most of the top coins going up. Similarly, when Ethereum had notable bull gains, Bitcoin and others would follow. It seems like it’s not the case anymore.

What is Stopping Bitcoin?

It might be hard to figure out what is really stopping Bitcoin, especially when we know massive trust funds are buying more Bitcoin than is being mined. Clearly, the interest for Bitcoin is there but why is this not reflected in its price?

First, we have to understand that Bitcoin already had a significant rally after the crash on March 12. Bitcoin is up 153% since the 2020-low. Clearly, the digital asset has managed to recover but it didn’t do it on its own.

The global stock market also started to recover and it seems that Bitcoin has been heavily correlated with it during 2020. This fact is definitely not good for Bitcoin which is supposed to be the antagonist of fiat currencies and the stock market.

Investors are not putting their money into Bitcoin expecting it to simply follow the stock market, they want more than that. While major trust funds like Grayscale may be buying a lot of Bitcoin, thousands of traders and investors are looking into other alternatives.

50,000 traders using an average of $3,000 not using Bitcoin might not seem like much but that’s still $150 million, a significant amount of money. If funds are constantly switching from Bitcoin to altcoins, there is simply not enough buying power to push Bitcoin above $10,000 even if the long-term metrics are bullish.