Thomas Daniels
Despite a notable drop in liquidity in the larger cryptocurrency market, Bitcoin’s dominance has risen to a new cycle high, reaching 61%. Matrixport claims that the Federal Reserve’s increased hawkish approach and better-than-expected U.S. job growth are the main causes of this change.
Strong labor markets frequently indicate a strong economy, which increases the possibility of higher interest rates or a postponement of anticipated rate reductions. Investors turn away from riskier cryptocurrencies in favor of Bitcoin as borrowing costs increase and liquidity tightens across financial markets. Bitcoin’s dominance has grown consistently despite a price fall, highlighting its position as the preferable asset under unpredictable macroeconomic situations.
According to Matrixport data, Bitcoin’s market share was 60.3% on November 5 but fell to 53.9% on December 9 as altcoins gained ground after the US elections. This surge, however, was short-lived, and as investors adapted to the macroeconomic environment, Bitcoin’s market share increased.
The market value of cryptocurrencies drops by $900 billion.
The overall market for cryptocurrencies has shrunk significantly. In December, when Bitcoin accounted for almost 53% of the market, the total market valuation reached a peak of $3.8 trillion, according to Matrixport. But by early March, the market capitalization had fallen by $900 billion to about $2.9 trillion. This emphasizes how the industry’s liquidity is declining, especially for altcoins.
Bitcoin has proven more resilient than its peers in spite of the general decline. In the last month, Bitcoin (BTC) has dropped 24% from its peak of $109,000 in January, Ethereum (ETH) has plummeted to $1,895, and Solana (SOL) has experienced a precipitous 39% loss.
The Future of Bitcoin and the Fed’s Monetary Policy
The monetary policy of the Federal Reserve continues to have a significant impact on the direction of Bitcoin’s price. Analysts at Matrixport predict that liquidity issues will keep limiting Bitcoin’s potential for sharp price increases. Although Bitcoin has fared better than other cryptocurrencies, it will need patience to maintain a sizable upswing since Fed policies could offset any beneficial liquidity benefits.
The market is currently undergoing a protracted period of recalibration, during which Bitcoin’s dominance is anticipated to continue to be strong although overall cryptocurrency liquidity is still limited. The capacity of the cryptocurrency market to rebound when macroeconomic conditions change will mostly rely on changes in investor sentiment and interest rate expectations.
