Crypto newsletter: Bitcoin dominance continues to slide

• Ethereum break above $4000
• Bitcoin Taproot upgrade faces difficulties

Bitcoin registered another flat week, while many altcoins keep climbing higher. Today Ethereum extended its rally and broke above the psychological milestone of $4,000 for the first time. Altcoins have been ripping over the last few months, leading the bitcoin dominance to decline from 71% on Jan 1st to 43.8% today. The capitalization of all digital assets in circulation rose to 2.47 trillion, while an average daily trading volume is registered at $230 billion.

Bitcoin market dominance dropped significantly in recent weeks. Source: Coinmarketcp.com

Bitcoin's upcoming Taproot upgrade struggles to find support from miners

The Taproot update is expected to be launched on the Bitcoin protocol by November 2021 and could potentially make the Bitcoin ecosystem more user-friendly as well as secure. New upgrade seeks not only to enhance the overall usability of the network by making transactions cheaper, faster and easier to deploy but also eventually allow for the deployment of smart contracts. The Speedy Trial started last week, which allowed miners who wish to adopt the upgrade to signal their support by adding special data in the blocks they mine with a “signal bit.” There would also be a three-month activation period which would allow miners to signal for the upgrade. 

If during this time bitcoin Taproot receives support at the level of 90% of the hashrate, its activation in the BTC network will take place after another 3 months. If the miners do not make changes, the proposal will be rejected. At the moment approximately 28% of blocks have agreed to the Taproot activation, while 45% had not signaled support, putting the minimum required threshold of 90% out of reach.

Bitcoin has been trading sideways recently. Today the price is approaching the lower limit of the triangle pattern. Should break lower occur, then downward move may accelerate towards support at $55,190. On the other hand, if buyers will manage to halt declines here, then another upward impulse towards the upper limit of the formation around $59.000 could be launched. Source: xStation5

Ethereum rally continues

Ether, the native cryptocurrency of the Ethereum blockchain and the second-biggest overall cryptocurrency, reached new all-time high at $4,137 on Monday. The year-to-date return is now around 435%, versus about 104% for bitcoin. Ether’s market capitalization increased to almost $470 billion, approaching the $488 billion stock-market valuation for JPMorgan Chase, the largest U.S. bank. The market for ether has become so ebullient that crypto derivatives exchange Deribit just listed an options contract expiring in March 2022 with a strike price of $50,000.

Meanwhile the funding rate for ETH remained stable around 0.08% on Binance. while other exchanges noted less than 0.06%. In previous cases, the sudden increase in prices caused the funding rate to move above 0.1%. According to some investors, the current financing rates are a signal that the increases may be continued.

ETH funding rates remain stable despite recent price surge. Source: BYBT.com

Ethereum price reached a new all-time high today at $4137, however buyers failed to break above the upper limit of the ascending channel and price pulled back. If the buyers will continue to book profits, Ethereum price could see a local correction to the support level at $3,720. Source: xStation5