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Omkar Godbole was a senior reporter on CoinDesk's Markets team.

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Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28.

There is plenty of fear in the crypto market since Sam Bankman Fried's digital-assets exchange, FTX, went bust, so much so that digital assets have decoupled from the risk revival in traditional markets.

Yet bitcoin's (BTC) dominance rate or the top cryptocurrency's share in the total crypto market has held steady at around 40%, contradicting its record of rising sharply during times of stress.

According to observers, the stagnant dominance rate represents several developments, including an exodus of investors from the market.

"BTC has not outperformed the downside in recent months, so investors no longer view it as a safe haven," Wes Hansen, director of trading and operations at crypto fund Arca, said in an email.

"More broadly, the events of November 2022 have shaken the confidence of a lot of investors in this space. In prior cycles, investors would move into BTC to protect the downside when the market fell off. But because of the size of this year's scandals and their far-reaching impacts, a lot of investors aren't moving to BTC because they're just leaving the space entirely," Hansen added.

The collapse of FTX, which had its tentacles in every nook and corner of the crypto market, has been the biggest in a string of big crypto-related failures this year and brought down several firms, including crypto lender BlockFi.

Bitcoin has the most liquidity and is the least volatile of all cryptocurrencies, except for stablecoins. Therefore, crypto investors have tended to move money into BTC when they feel less confident about the overall market condition.

Investors sought shelter in bitcoin in the first half of this year as the Federal Reserve's hawkish turn and Terra's implosion led to a crash in the broader crypto market. The safe-haven bid for bitcoin lifted its dominance rate from 39% to 48%. A similar bump was seen during the market swoon of May and June 2021 as well as during the 2018 bear market.

That's not happening this time, however, as traders are moving to cash. According to Hansen, registered investment advisors have been the largest group of defectors from the crypto market.

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BTC's dominance surged early this year as the Fed tightening and Terra's collapse weighed over the crypto market. (TradingView/CoinDesk) (TradingView, CoinDesk)

Crypto market is maturing

Holding stablecoins – cryptocurrencies with values pegged to an external reference like the U.S. dollar – is a better option for investors, according to Richard Rosenblum, co-founder of crypto trading firm and liquidity provider GSR.

"There are many risks, including from macro markets and the risk perceived in holding crypto on an exchange, post-FTX. Moving to stablecoins is a most defensive posture, vs. moving into BTC, which is still a volatile asset in the end," Rosenblum told CoinDesk when asked if stablecoins have replaced BTC as crypto market safe havens.

Rosenblum, however, cautioned against reading too much into the dominance rate, as people leaving the market amid a prolonged price swoon is normal and doesn't necessarily imply the end of the world for crypto.

"It is an oversimplification to look at dominance in itself as a metric. It had more meaning in 2017 or 2018. Now there are a lot more components, both in crypto and how other asset classes and events impact the space," he said.

Bitcoin no longer represents a major chunk of development happening in the crypto industry as it did in 2018 and before. Exactly four years ago, during the peak of the 2018 bear market, bitcoin's share in the total crypto market was 59.4%, compared with 40% at press time.

Noelle Acheson, author of the popular "Crypto Is Macro Now" newsletter, voiced a similar opinion in a note sent to subscribers over the weekend.

"It's possible that BTC has not outperformed other crypto assets because, rather than rotate into relative safety, investors have largely left the market," Acheson said.

Acheson added that the strange behavior of the bitcoin's dominance rate during the market downturn indicates that the market composition has changed for the good.

"Bitcoin is still the anchor asset, by a widest margin, but the volatility of its protagonism is weakening. This is a sign of maturing asset class. That this should become apparent during one of the darkest times is cause for hope," Acheson noted.

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Omkar Godbole was a senior reporter on CoinDesk's Markets team.

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Omkar Godbole was a senior reporter on CoinDesk's Markets team.