Stack Funds — an issuer of crypto access products that include trackers, indexes and structure vehicles for institutions — has released a new report predicting that Bitcoin (BTC) dominance is set to ratchet back up to former highs in the near future.

Cryptocurrency dominance trends, Jan. 1 – May 20. Source: CoinMarketCap

As of the start of 2021, Bitcoin dominance — the cryptocurrency's share of the total market capitalization of all crypto assets — has been on a steady decline, down from 72.3% in January to roughly 40% this week. As Stack Funds' head of research Lennard Neo notes, that figure represents a three-year low since May 2018. 

Whilst BTC dominance has continued to go south, total market capitalization has gone in the opposite direction, gaining 40% in value over the same time frame. For Stack Funds, this implies that investors' capital remains locked in the crypto markets. Neo notes that key sectoral rotation has been at play, with investors seeking to maximize opportunity costs, as seen by the rise of Ether's (ETH) price by almost 180% at last month's highs.

However, the dynamics between dominance and the wider markets suggest a swing back in trends. For Stack Funds, BTC dominance is long due for a rebound:

"We believe the rotational playbook has reversed as dark clouds loom over the markets. We are expecting investors to cycle back into Bitcoin as uncertainties increases as the markets undergo another reset. Hence, a bounce in Bitcoin dominance should occur, further supporting Bitcoin’s price in the short-term."

Stack Funds' report also notes the dramatic volatility of the past week, echoing other commentators and analysts who have pointed to the impact of comments from Elon Musk and his company Tesla, as well as bearish news of a potentially renewed crypto crackdown in China.