The volatility of digital assets particularly Bitcoin (BTC) can be examined in various stages of a bull market in relation to other tokens, Pantera Capital suggests.

A new market report by Pantera Capital shows the relationship between multiple assets in crypto bull cycles, the state of the market, and perspectives on the 2024 season on Bitcoin, altcoins, and decentralized finance (DeFi).

With a momentous onset to the year, we believe there is still a ton to look forward to in 2024.

In this month’s letter, we discuss:

– Predictions for 2024
– Crypto correlations within bull cycles
– State of blockchain venture
– The potential of AIxWeb3https://t.co/kq92Qneie3

— Pantera Capital (@PanteraCapital) January 16, 2024

In the first phase of every bull run, Bitcoin tends to outperform other assets. However, the next phase is dominated by several altcoins taking the torch from the market leader.

Source: Pantera Capital

This is mainly due to the size, market share, and narratives behind the asset. Bitcoin’s market capitalization stands at over $809 billion with a market share of 47.2% making it the most offered cryptocurrency to institutional investors.

As institutional investors enter the market, sparking a bullish momentum, the first cryptocurrency asset and related products they delve into is Bitcoin. This increases the asset’s price and significantly raises the broader market.

This could be seen throughout last year when the market creeped out of the doldrums with an uptick in institutional appetite on the back of a potential spot BTC ETF approval by the Securities and Exchange Commission (SEC).

Bitcoin is the first crypto of new entrants

Following the filing of BlackRock as other traditional investors, the Bitcoin price skyrocketed over 157% in the last 12 months igniting the interests of bulls over another run. However, the price has plummeted since the final approval.

Furthermore, Bitcoin is the most offered asset to new entrants to cryptocurrencies and its liquidity attracts various classes of investors. With a market share of almost 50%, new users first want to piece of the asset before going down the “crypto rabbit hole”. 

“Second, first-time investors often buy bitcoin first before seeking out exposure to other tokens.  It has a 15-year track record and a brand that many would consider to be synonymous with the industry itself.”

Analysts Cosmo Jiang and Erik Lowe in an attempt to answer how tokens are co-related in a bull market  took cognizance of the last two cycles when Bitcoin had a “sizable market share.”

After users explore Bitcoin, they widen their reach to altcoins exploring a plethora of use-cases and innovations like the decentralized applications (dApps) and the rise of non-fungible tokens (NFTs) in 2021.

Per the report, altcoin share declines while the wider markets cap grows in early months and 70% in, altcoins record an uptick.

Source: Pantera Capital

In 2021, BTC had a 77% growth in phase 1 while altcoins posted a mere 23% but in the latter stages, while BTC recorded a 33% rise, altcoins spiked 67%.

“Over the long term, token selection will be paramount because outperformance will be on a case-by-case basis and not necessarily in a certain sector or based on fickle, short-lived speculative narratives.”

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