As the crypto market continues to evolve, we’re seeing a unique shift in dynamics that many didn’t anticipate. Bitcoin (BTC) is currently dominating the space in a way that surprises even seasoned investors.

Meanwhile, Ethereum (ETH) has struggled to build momentum, and select altcoins are showing signs of life. In this article, we’ll break down these key movements and what they mean for investors moving forward.

Bitcoin’s Unprecedented Dominance

BTC has been sucking up all of the momentum of the crypto market lately. It is simply outperforming just about every other cryptocurrency. After dipping to $53,000 over the past weekend BTC is back to trading just under $58,000. However the rest of the market is still lagging behind and trading near last weekend’s lows.

Right now, Bitcoin is the clear leader in the crypto market, with a staggering dominance of 57.4%. Bitcoin dominance refers to the percentage of the total cryptocurrency market capitalization that is made up by Bitcoin. It’s a key metric that helps gauge the overall market sentiment and can indicate whether the market is in a “Bitcoin-led” phase or an “altcoin season.”

When Bitcoin dominance is high, it generally means investors are favoring Bitcoin over other cryptocurrencies, often during periods of uncertainty or when new institutional money flows into the space.

This shift in focus toward Bitcoin can suppress altcoin prices, as capital that might otherwise flow into alternative cryptocurrencies is concentrated in Bitcoin instead.

Conversely, when Bitcoin dominance falls, it typically signals a more speculative environment where investors feel confident enough to rotate into higher-risk, higher-reward altcoins, causing a rise in their prices. Therefore, Bitcoin dominance plays a crucial role in the internal crypto market cycles, determining whether the market will see a Bitcoin-led rally or an altcoin surge.

This level of market share is unusual for Bitcoin at this stage of the crypto cycle, and it’s reshaping the way investors approach the space. Typically, during this phase, you’d expect altcoins to start rallying, siphoning value and market dominance away from Bitcoin.

However, this time, the market is moving in a different direction, and much of it can be attributed to one major catalyst: the introduction of spot Bitcoin ETFs.

These ETFs have injected a new layer of institutional interest in Bitcoin, giving it a boost that has left the rest of the market lagging behind. The entrance of major financial players into Bitcoin through these funds has tilted the market dynamics in its favor, pushing more capital into the world’s first cryptocurrency and increasing its dominance.

As a result, Bitcoin should be the sole focus of crypto investors for now. The market is in a delicate balance, and for the rest of the crypto space to thrive, Bitcoin needs to break out of its current downtrend. A significant breakout in Bitcoin could provide the space the altcoin market needs to rally.

Ethereum’s Struggles

While Bitcoin thrives, Ethereum has been lagging behind. After years of outperforming Bitcoin during bullish phases, Ethereum now finds itself in an uncharacteristic slump.

Despite being just a couple of months removed from the much-anticipated launch of the spot ETH ETFs, Ethereum has struggled to gain any momentum, trapped in a lower trading zone that it has been unable to break out from.

ETH has barely been able to climb since hitting a low of under $2,200 last weekend. It is trading at just over $2,300 today.

The sentiment surrounding Ethereum has turned surprisingly negative, especially among retail investors. Many seem discouraged by its recent performance and are questioning its place in the broader market. However, not all investors share this pessimism.

Institutional investors remain far more bullish on Ethereum, seeing its long-term potential as a smart contract platform and its pivotal role in the decentralized finance (DeFi) ecosystem.

What’s causing this disconnect? Retail investors might be wary due to Ethereum’s recent underperformance compared to Bitcoin, but institutional players have a more patient, strategic view of the asset.

As this divergence continues, something is likely to break in the coming months. Ethereum’s recent struggle won’t last forever, and when the tide turns, Ethereum bears may find themselves worse for wear. The fundamentals remain strong, and it’s only a matter of time before we see a shift in momentum.

Altcoins: Aave Leading the Way

While much of the altcoin market has suffered from Bitcoin’s dominance and Ethereum’s stagnation, not all altcoins are performing poorly. One standout performer over the past month has been Aave (AAVE). This DeFi protocol has been on a tear, recently setting a yearly high by peaking above $155. AAVE has since come back down to $144, which is still 88% above the August 5th lows.

If you’re a part of my premium service, Crypto Trend Investor, you’d have been well-positioned to capitalize on Aave’s surge. Our members bought into Aave back in May, and are now sitting on returns of around 70%. Aave’s impressive performance highlights that while Bitcoin might dominate, and Ethereum might struggle, there are still opportunities in the altcoin space if you know what to look for.

As we move through the next few months, other strong altcoins may begin to break out, but they will need either Bitcoin’s downtrend to end or Ethereum to recover momentum. Until then, the focus remains on Bitcoin’s dominance and how it will dictate the next phase of the market cycle.

Conclusion

The current crypto landscape is a tale of contrasts: Bitcoin’s dominance is higher than normal at this stage of the cycle, fueled by institutional interest and the launch of spot ETFs, while Ethereum struggles to break out of its downtrend. Meanwhile, select altcoins like Aave are defying the broader trend, showing that there are still opportunities for sharp gains if you know where to look.

Investors should keep their eyes on Bitcoin’s price action. A breakout from its downtrend could be the signal for the entire market to start moving again. Until then, patience and strategy are key, as the market remains in a period of transition.

This article previously appeared on Investing Daily.