Bitcoin dominance has reached a new cycle high as the post-election altcoin rally loses steam, according to a report by Matrixport. Despite a price correction, investors are shifting their focus from altcoins to Bitcoin, driven by stronger-than-expected U.S. job growth and the Federal Reserve’s hawkish stance.
Matrixport has reported that Bitcoin dominance has surged to over 61%, attributing this increase to two main factors: a better-than-expected U.S. jobs report and the Federal Reserve’s increasingly hawkish stance. When job growth exceeds expectations, it indicates a strong economy, leading to higher interest rates or a delay in rate cuts. This reduction in liquidity in financial markets makes borrowing more expensive, prompting investors to move towards safer assets like Bitcoin.
The data from Matrixport shows that Bitcoin dominance was at 60.3% on November 5th but dropped to 53.9% by December 9th as altcoins surged following the U.S. elections in November. The overall crypto market cap trend also reflects this shift, with the total market cap increasing during the November altcoin rally but declining as Bitcoin regained dominance. By early March, the crypto market cap had dropped significantly from its post-election peak of $3.8 trillion in December to around $2.9 trillion, representing a $900 billion decrease.
Despite the market cap contraction, Bitcoin has remained relatively resilient compared to altcoins. While Bitcoin’s price declined by 24% from its all-time high of $109,000 in January, Ethereum dropped to $1,895 in the past month, and Solana saw a 39% decrease in the same period. However, the price correction in Bitcoin aligns with the declining market cap, indicating that the liquidity dry-up is impacting its price.
Matrixport analysts believe that it will be challenging for Bitcoin to sustain significant price increases solely based on increased liquidity due to the Federal Reserve’s stance. Any further gains are expected to require more patience from investors, with gradual increases likely. The Fed’s actions may counteract the positive effects of increased liquidity, making it a waiting game for investors.
In conclusion, Bitcoin dominance has hit a new cycle high as the altcoin rally fizzles out, with investors shifting their focus towards Bitcoin amidst stronger U.S. job growth and the Federal Reserve’s hawkish stance. Despite the market cap contraction and price corrections, Bitcoin remains relatively resilient compared to altcoins, but further price increases may require patience and gradual growth.