Bitcoin's price briefly surged past the $35,000 mark this week and some analysts think that growing small-investor participation may bode well in the coming weeks, but the rise in the cryptocurrency hasn't helped the rest of the market.

Trading related to the news of a potential approval of a spot bitcoin exchange-traded fund (ETF) intensified, pushing up the price above $30,000 and squeezing shorts, according to Deutsche Digital Assets Head of Research André Dragosch. The short squeeze led to more than $250 million liquidation of short positions over the past three days, according to data from Coinglass.

At the same time, the Bitcoin Dominance Index (BDI)—a measure of bitcoin's share of the overall crypto market—reached heights not seen since April 2021.

Bitcoin Dominance Index at Highest Levels in Two Years

While a rising bitcoin tends to lift all crypto assets, the rest of the market has not been able to keep up with bitcoin this week. In fact, this has been the trend for nearly a year, as the BDI has seen a steady increase since the collapse of crypto exchange FTX in November 2022. Today, BDI is about 54.4%— its highest level since April 2021.

Indeed, the darlings of the previous crypto bull market have not fared well relative to bitcoin over the past year. For example, the native crypto asset of Ethereum, ether, is up only 14% in the past year as opposed to a roughly 66% gain for bitcoin.

At the same time, Bloomberg reported that crypto tokens are being delisted from exchanges at a rate never before seen in the industry's history, according to data from Kaiko. Nearly 3,500 crypto token delistings have either already taken place or are expected to take place in 2023, and Coinbase (COIN), which is currently being sued by the U.S. Securities and Exchange Commission, is said to have delisted 80 trading pairs this month alone.

Small Investors Laying Groundwork For Bitcoin Bull Market?

Dragosch observed increased bitcoin wallet activity for both small and large invetsors, but there was one number that stood out. An increase in "median value of transfer volumes on the Bitcoin blockchain"—an indicator of small-investor participation—could hold some clues about the price direction for bitcoin.

"Small-investor participation is a necessary condition for a sustained bull market in crypto assets," Dragosch wrote.