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Bitcoin's Dominance Slides by Most in 3 Years as BTC's Correlation With Altcoins Weakens
The declining correlation between bitcoin and altcoins suggests potential for increased market volatility and forced liquidations, per one observer.
Updated Jul 21, 2025, 1:36 p.m. Published Jul 21, 2025, 5:53 a.m.
What to know:
- Bitcoin's dominance in the cryptocurrency market has dropped to its lowest level since March, falling by 5.8% in one week.
- The total cryptocurrency market capitalization has risen to approximately $3.8 trillion, with altcoins like ether leading the growth.
- A declining correlation between bitcoin and altcoins suggests potential for increased market volatility and forced liquidations.
Bitcoin's dominance rate has dropped sharply, indicating that traders are increasingly focusing on the broader cryptocurrency market.
The dominance rate, representing BTC's share of the total cryptocurrency market valuation, has decreased by 5.8% in one week to just under 61%, marking the lowest level since March, according to data source TradingView. This is the biggest slide since June 2022. The gauge peaked closer to 66% at the end of the last month.
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Meanwhile, the total crypto market capitalization has increased from $3 trillion to roughly $3.8 trillion in three weeks, with altcoins like ether leading the way higher as BTC's market share dropped.
In other words, it has been more profitable lately to stay invested in altcoins rather than bitcoin. Moreover, with BTC taking a bull breather below $120,000, its positive correlation with altcoins has weakened significantly, a pattern that has historically presaged heightened volatility and forced liquidations of leveraged bets, according to research by Alphractal.
"One chart stands out: the Correlation Heatmap. It shows that the average correlation between altcoins and BTC is dropping fast — even turning negative. In other words, altcoins are no longer following Bitcoin’s movements. Historically, low correlation is a red flag. It often precedes periods of high volatility and mass liquidations — whether from shorts or longs," Alphractal said in a Telegram chat.
BTC bull run puts focus on unit bias
Unit bias is a cognitive bias that causes investors to prefer owning whole units or a large number of units of an asset over fractions or a small number of units, even if both represent the same value in absolute terms.
In other words, as BTC becomes costlier at record highs, new entrants into the market and inexperienced investors shift to cheaper tokens, equating their low per-unit price with affordability or higher growth potential, while ignoring their market capitalization or circulating supply.
This illusion that owning one XRP or one DOGE is better than one BTC leads to capital moving to altcoins, especially low-unit memecoins, driving the bitcoin dominance rate lower, as seen lately.
Read more: Chart of the Week: Wall Street's 'Infinite Money Glitch' Moves From Bitcoin to Altcoins
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