Bitcoin dominance falls below 40% for the first time since January, Ethereum miner balance hits all-time high before merger

According to data from CoinMarketCap , Bitcoin 's dominance (BTC.D: Bitcoin's market capitalization relative to all crypto assets) fell below 40% for the second time since 2018 and is at an eight-month low, and Ethereum miner balances (i.e. the amount of ETH held by miners) hit an all-time high.

The move stands in stark contrast to the crypto bear market that began in 2018, when Bitcoin dominance rose to over 70% in September 2019 amid a market-wide decline as alternative crypto asset prices plummeted .

The push for Ethereum mergers

Ethereum has become a major force driving BTC.D near all-time lows. After climbing from lows below 8% in Q4 2019, ETH’s dominance (ETH.D) was 20% as of August 30.

ETH.D did not collapse with the bear market - instead, it has remained roughly at 20% since November 2021, while BTC.D has been roughly stable since May 2021.

The ETH/BTC ratio, or the price of ETH against BTC, is largely similar to the ETH.D chart. The two major cryptocurrencies account for 60% of the market - ETH's relationship with BTC largely determines its dominance in the entire crypto market.

According to data from The Defiant Terminal, ETH has fallen 59% in the past year. Despite this, it has maintained a dominance of about 20% as all major tokens have been “bloodbathed” during this period.

Financing rates at 14-month low

ETH’s funding rate has also hit a 14-month low, according to an Aug. 28 report from cryptocurrency trader Maartunn.

When the funding rate for an asset’s perpetual futures is negative, it indicates that there is an excess of sellers and traders are profiting by going long. As Maartunn points out, the last time ETH’s funding rate was this low was in July 2021, shortly before the asset rebounded in a short squeeze.

Miner balances, or the amount of ETH held by miners, also more than doubled from 114,255 last year to 261,849, according to OKLink data. This could indicate that miners were bullish ahead of the merger as they chose to hold ETH block rewards rather than sell tokens.

With the first phase of the much-anticipated Ethereum upgrade just a week away, anticipation appears to be driving ETH’s price action as traders also make bullish bets through derivatives.

On-chain data shows that the BTC funding rate remains negative, indicating that bearish investors are paying bullish traders for the right to short BTC. The funding rate has been negative for 11 of the past 12 days, indicating that bearish sentiment currently dominates.