Bitcoin Dominance at 59% - This Crash is Capitulation, Not Collapse

Your portfolio is down 40%. Bitcoin crashed from $126,000 to $85,800 in six weeks. Altcoins are bleeding harder. You’re watching your net worth evaporate in real-time and asking the only question that matters: Is this going to zero?

The answer depends on something most investors don’t understand: the difference between a bear market beginning and a deleveraging event ending.

This isn’t hopium. This isn’t “buy the dip” cheerleading. This is the institutional framework for reading liquidity cycles—and right now, every major signal suggests we’re at the tail end of pain, not the beginning.

Here’s why.

The Question Everyone’s Asking Wrong

When Bitcoin crashes 30%, retail asks: “Why is Bitcoin falling?”

Institutions ask: “Where is capital flowing?”

That distinction matters because it changes everything about how you read this moment.

Bitcoin’s price tells you what happened. Bitcoin dominance tells you what’s happening and what comes next.

What Bitcoin Dominance Actually Measures

Bitcoin dominance is Bitcoin’s share of total cryptocurrency market capitalization. As of November 23, 2025, it sits at 59.07%.

Most investors think this measures “popularity” or “sentiment.” Wrong.

Bitcoin dominance is a capital allocation meter. It tells you where money is currently parked within crypto. When dominance rises, capital is flowing INTO Bitcoin and OUT of altcoins. When dominance falls, capital rotates OUT of Bitcoin and INTO altcoins.

Think of crypto as a closed system with $2.9 trillion sloshing around inside. Dominance tells you which bucket that capital is sitting in right now.

Current reading: 59% of that capital is in Bitcoin.

What 59% Dominance Tells You:

Now here’s what makes this number remarkable: Bitcoin just crashed 32%—and dominance barely moved.

What 59% Dominance During a Crash Actually Means

Let’s establish the baseline. In 2018, during the bear market crash, Bitcoin dominance eventually fell to around 36% as the market collapsed. Capital was fleeing Bitcoin AND fleeing crypto entirely.

In May 2021, during the cycle peak correction, Bitcoin dominance fell to around 40% as retail rotated aggressively into altcoins at the worst possible moment.

Those were panic exits from Bitcoin.

Now look at today: Bitcoin falls from $126K to $85.8K (-32%)… and dominance sits at 59%.

This tells you something critical: Capital fled crypto system-wide—but it fled altcoins faster than Bitcoin. When $1 trillion evaporated from total crypto market cap, dominance staying stable at 59% means one thing: alts got hit even harder. In early bear markets, retail panic-sells BTC and rotates into alts trying to “recover losses” (dominance crashes). In late-stage deleveraging, retail gives up entirely and sells everything—but alts bleed faster (dominance stable or rising). This is the latter.

As Rohit Apte, Head of Markets at Hex Trust, noted: “Bitcoin’s drawdown this month reflects a general deleveraging that began with October’s liquidation. Since then, the market has been grinding lower as leverage is flushed out.”

The difference matters because one leads to zero. The other leads to rotation.

The Bear Market vs. Deleveraging Checklist

Here’s how to tell if you’re fucked:

Bear Market Beginning (You’re Fucked):

• Dominance rising sharply (capital fleeing alts AND BTC)
• Federal Reserve accelerating QT (liquidity drain intensifying)
• Leverage building into weakness (denial phase)
• No macro catalyst for reversal

Deleveraging Event Ending (You’re Not Fucked):

• Dominance stable or falling (capital staying in crypto)
• Federal Reserve ending QT (liquidity drain stopping)
• Leverage flushed (forced selling complete)
• Macro pivot approaching

Current scorecard:

✅ Dominance holding 55-60% (not spiking)
✅ QT ends December 1, 2025—Fed balance sheet at $6.57 trillion, final month of runoff
✅ October 10 liquidation flushed $19 billion, largest in crypto history
✅ Fed balance sheet runoff concluding after 3.5 years

This isn’t a bear market starting. This is late-cycle liquidation as the liquidity environment shifts.

The 2019 Playbook: What Actually Happens When QT Ends

Quick context: Quantitative Tightening (QT) means the Fed shrinks its balance sheet by letting bonds mature without replacement, draining liquidity from markets. The opposite is Quantitative Easing (QE), where the Fed buys bonds and injects liquidity. When QT ends, the drain stops—but that doesn’t mean liquidity immediately floods back in.

Everyone knows “QT ending = bullish eventually.” Nobody understands the timing.

The Timeline:

September 2019: Fed ends QT amid repo market stress. Bitcoin at $10K (down from $13K in June).

Q4 2019: Nothing happens. Bitcoin chops to $7,200. Painful. Frustrating. Many give up.

January-February 2020: Modest recovery begins. Bitcoin grinds back to $10K.

March 2020: COVID crash to $3,800, then Fed opens QE floodgates. Bitcoin recovers to $6,400.

Q1 2021: Full altseason begins—18 months after QT ended. Dominance crashes from 70% to 40%.

The Pattern: Dominance maintained 48.8-72.5% range through 2019-2020. Rotation didn’t start until Fed actually EXPANDED, not just stopped draining.

The Three-Phase Lag Pattern

Here’s what institutions understand that retail doesn’t:

Ending QT ≠ Starting QE

The Fed stopping the liquidity drain is Phase 1. The Fed actually EXPANDING the balance sheet is Phase 3. There’s a gap between them.

Phase 1: Stabilization (3-6 months)

• QT ends, liquidity drain stops
• Markets consolidate, don’t moon
• Dominance holds steady
• This is where we are now

Phase 2: Early Rotation (IF Fed Begins Expanding)

• Fed signals or begins balance sheet growth
• Large-cap rotation begins (ETH, SOL, major alts)
• Dominance starts declining
• This is Q1-Q2 2026 IF expansion begins

Phase 3: Full Altseason (IF Expansion Continues)

• Fed actively expanding, liquidity flooding in
• Broad market rotation, dominance <50%
• Meme coins, small caps, everything pumps
• This is Q2-Q3 2026 IF expansion is sustained

The key insight: We’re in Phase 1. Most people think we should already be in Phase 3.

That’s why portfolios are bleeding. The market is pricing in disappointment that the rotation hasn’t started—but the rotation was never supposed to start yet.

What’s Different in 2025: The ETF Wildcard

The 2019 analog isn’t perfect. Bitcoin ETFs didn’t exist then.

Bitcoin ETFs saw sustained panic selling through November, with BlackRock’s IBIT recording multiple days exceeding $300 million in outflows—retail investors and wealth advisors exiting through brokerage accounts. Yet dominance held at 59%.

Here’s why this matters: At cycle peaks, dominance crashes as retail rotates into altcoins (2018: 36%, 2021: 40%). In early bear markets, dominance then RISES as altcoins bleed harder than Bitcoin. But now? Dominance is stable at 59% during a 32% Bitcoin crash. Capital is leaving crypto system-wide, but alts are bleeding faster than BTC. This looks like late-stage deleveraging capitulation—not peak euphoria, not the start of a fresh secular bear.

How ETFs Change The Game:

Higher Dominance Floor: Institutional allocation through ETFs creates structural demand. In 2018 and 2021, dominance fell to 36-40%. In 2025, it may never go below 45-50%.

Slower Rotation: Institutional capital rotates deliberately, not via retail FOMO. We may see measured rotation over quarters rather than explosive crashes.

Unknown Variable: ETFs could also amplify volatility if institutional FOMO arrives late.

Bottom Line: The setup mirrors 2019, but the capital structure is fundamentally different.

The Historical Dominance Pattern: Speed Matters

2017-2018 Altseason

February 2017 to January 2018: Dominance fell from 95% to 37%

Duration: 11 months | Drop: 58 points | Character: ETH surged 13,400% ($11 → $1,440)

2020-2021 Altseason

January to May 2021: Dominance peaked at 70%, crashed to 40%

Duration: 5 months | Drop: 30 points | Character: DeFi explosion, NFT mania, broad rotation

Current Setup: 2025

Starting point: 59% dominance
Expected floor: 45-50% (ETF structural bid)
Duration IF rotation begins: 3-6 months
Character: Institutional-led, more selective

Where We Are Right Now: Reading the Setup

Let’s get granular. Here’s what the data says about our current position.

Fed Balance Sheet Context

November 2025: Fed balance sheet at $6.57 trillion, compared to ~$3.7 trillion when QT last ended in September 2019. The balance sheet is 78% larger, but that’s partly structural. What matters: the draining stops December 1.

Dominance Technical Picture

Current: 59.07%
Recent range: 55-60%
Historical resistance: 60-62%
Key support: 55-58%

Analyst Matthew Hyland: “The BTC Dominance chart looks bearish and has looked bearish for many weeks. The downtrend is favorable to continue”

Trader Don pointed to head-and-shoulders structure on Bitcoin Dominance chart, bearish reversal signal

But here’s the critical point: Bearish dominance = bullish altcoins. A dominance breakdown would signal Phase 2 beginning.

ETH/BTC: The Leading Indicator

Current ETH/BTC ratio: 0.0326, has stayed under 0.05 for over a year

Historical context: ETH/BTC surged 345% to 0.08 peak in 2021 as DeFi TVL rose from $465M (March 2020) to $159B (Nov 2021)

ETH/BTC typically leads altcoin rotation. When it breaks 0.04, that’s your Phase 2 signal. Currently needs a 23% surge to reach this level.

Market Sentiment

Crypto Fear & Greed Index crashed into “Extreme Fear”

Analyst Merlijn: “ALTCOIN SEASON STARTS WHERE EVERYONE GIVES UP. Same base. Same wedge. Same disbelief. Every previous altseason was born here”

Extreme fear during late-stage deleveraging as QT ends? That’s the setup, not the collapse.

What to Watch: The Framework for Reading What Comes Next

This isn’t about predictions. It’s about having a framework for understanding what signals matter.

Phase 1 Checklist: Stabilization (Now - Q1 2026)

Watch for:

• Bitcoin holds $83-90K range
• Dominance stays 55-60% (doesn’t spike to 65%+)
• ETH/BTC holds above 0.030
• Altseason Index stays 25-50 range
• Fed balance sheet stabilizes (no surprises)

What this means:
Deleveraging complete, liquidity drain stopped, market consolidating. This is the “boring phase” where nothing happens but foundation gets built.

Historical pattern:
Institutional desks typically build positions during stabilization phases while retail capitulates. Accumulation windows for quality assets have historically occurred in this range, though timing varies by cycle.

Phase 2 Triggers: Early Rotation (Q1-Q2 2026)

Watch for:

• Fed signals or begins balance sheet expansion
• Dominance breaks below 55%
• ETH/BTC breaks 0.04
• Altseason Index crosses 50
• Large-cap alts (ETH, SOL, LINK) outperform BTC

What this means:
Capital rotation beginning. Smart money moving out of BTC into large-cap alts.

Historical pattern:
Past cycles showed early rotation phases characterized by profit-taking from Bitcoin into established large-cap altcoins. Small-cap rotation typically lagged by several months.

Phase 3 Confirmation: Full Altseason (Q2-Q3 2026?)

Watch for:

• Dominance falls below 50%
• Altseason Index >75
• Mid and small-cap alts accelerating
• Meme coins catching bids
• Extreme greed returning

What this means:
Late cycle. Euphoria building. This is where fortunes are made and lost quickly.

Historical pattern:
Late-cycle altseasons historically showed rapid gains followed by equally rapid reversals. Successful participants in past cycles typically had predetermined exit strategies and took profits incrementally rather than holding through peaks.

The 2025 Wildcard: What Could Break the Pattern

All frameworks break eventually. Here’s what could invalidate this setup:

Bear Case: No Phase 2

If the Fed doesn’t expand the balance sheet—if they hold at $6.6T indefinitely—we may never get Phase 2 rotation. We’d see prolonged consolidation with dominance stuck at 55-60% for quarters.

What to watch: FOMC statements about balance sheet policy through Q1 2026

Bull Case: Faster Than Expected

If Fed expands aggressively (geopolitical crisis, financial instability), we could compress all three phases into 3-6 months instead of 6-12 months.

What to watch: Emergency Fed actions, crisis events

Structural Change: ETFs Alter the Pattern

If institutional allocation through ETFs creates different capital flows than retail-driven cycles, the historical playbook may not apply. We could see:

• Higher dominance floor (never goes below 50%)
• Slower rotation (quarters not months)
• More selective altseason (large caps only)

What to watch: ETF flow data, institutional allocation reports

The Bottom Line: Beginning or End?

Your portfolio is down 40%. That’s real pain. But here’s what the data suggests:

This crash is happening at the END of a 3.5-year liquidity drain, not the beginning of a bear market.

Bitcoin dominance at 59% means capital fled crypto system-wide, but altcoins bled faster than Bitcoin. That’s late-stage deleveraging behavior, not early bear market rotation.

The Federal Reserve stops draining liquidity in 8 days. Based on the 2019 precedent, that marks the beginning of a 3-6 month stabilization phase before any rotation begins.

Does this guarantee recovery? No. Markets don’t care about historical patterns.

But it explains why institutional desks are building positions while retail is capitulating. They’re not betting on immediate recovery. They’re positioning for Phase 2—which doesn’t even start until the Fed moves from “stop draining” to “start expanding.”

The question isn’t “Will my portfolio go to zero?”

The question is: “Am I positioned for the liquidity phase that starts when the drain stops?”

Because if you’re asking the first question, you’re reacting to price.

If you’re asking the second question, you’re reading the cycle.

What Pierce & Pierce Is Watching

1. December 1 Fed balance sheet report (confirms QT ended)
2. December 17-18 FOMC meeting (any signals about expansion?)
3. Bitcoin $83K support hold (confirms deleveraging complete)
4. ETH/BTC 0.04 break (confirms Phase 2 beginning)
5. Q1 2026 macro data (recession risk vs expansion path)

We’ll update subscribers as signals develop.

This isn’t the end. But it’s also not the beginning of recovery yet.

It’s the setup.

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Market commentary for educational purposes only. Not investment advice. Cryptocurrency markets are volatile and risky. Past performance doesn’t predict future results. Do your own research. Consult a financial advisor before investing.

Pierce & Pierce Research
November 23, 2025
Word Count: 2,960 words

Institutional intelligence for retail investors.