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News/Bitcoin dominance reaches nine-month high amid macro headwinds

Bitcoin dominance reaches nine-month high amid macro headwinds

Mar 17 2023

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In February 2023, the U.S. PPI fell by 0.1% MoM, which was lower than analysts’ expectation of  0.3%. Some analysts viewed this number as a sign that the Fed could increase interest rates by 25 bps rather than 50 bps at its next meeting next week. Hedge fund manager James Lavish of Bitcoin Opportunity Fund said that investors believe the Fed has removed a 50 bps hike from consideration, and at worst, there will be a 25 bps hike, and possibly no more hikes at all.

However, the newly released Initial Jobless Claims seem to be against the bullish momentum built on the previous two reports. Specifically, the numbers came out at 192,000, lower than the forecast of 205,000 and last week’s data of 212,000, signaling a strong labor market. Later on, the ECB’s interest rate hike came in at 50 bps, which means no “pivot” from the Eurozone.

Earlier today, to prevent the banking crisis from worsening, the Swiss government confirmed its collaboration with Credit Suisse to stabilize the bank and reassure the public that the financial system’s systemic risk will be contained. There have been rumors that Switzerland’s central bank would inject \(50 billion Swiss francs (\)53.8 billion) into the embattled Credit Suisse, causing its shares to rise by 40% today.

According to Michael Novogratz, CEO of digital asset and blockchain firm Galaxy Digital, we may face a credit crunch in the U.S. and globally. In this case, gold, silver, and Bitcoin could help save investors from a potential liquidity crisis when banks “typically rebuild capital” by lending less. However, some analysts prefer to remain cautious and believe that the Bank Term Funding Program (BTFP) can make it easier for the Fed to raise interest rates further while preventing harm to banks.

Crypto firms may have to turn to “shadow banks” or find other banks willing to work with them following the collapse of Signature and Silvergate banks, as well as FDIC’s effort to prevent Signature buyers from joining hands with companies in the industry, according to software engineer Molly White. She is concerned that crypto companies may have to resort to “shadier” solutions while the industry still needs access to traditional finance and U.S. banking rails.

Data from Coin360 shows that Bitcoin dominance has returned to its nine-month high at 43% after two turbulent weeks in the crypto market. FundStrat Research notes that an upside in Bitcoin dominance is generally seen as healthy for the crypto market since it signals relatively low froth in the market, with crypto traders choosing to buy Bitcoin over more speculative altcoins.

In the meantime, investment bank Morgan Stanley appears to have a different perspective. Their recent report insists that Bitcoin should be a means for people to hold value in private wallets without intermediaries. However, Bitcoin’s price is supported by USD bank liquidity, causing it to trade as a speculative asset rather than a currency.

Despite support from macroeconomic factors yesterday, Bitcoin encountered resistance at $25,000. Meanwhile, the DXY reached 105 for the first time since the Silicon Valley Bank implosion on March 1. Markets commentator Tedtalksmacro attributed this to lower euro bond yields, leading to a decrease in the EUR price, which fueled the DXY’s surge as it measures the USD’s strength against a basket of major trading partner currencies.

Bitcoin reserves on exchanges are seeing a continued uptrend, according to findings from CryptoQuant’s analyst caueconomy. He noted that the increase of Bitcoin on exchanges could lead to a sell-off. Coinbase is the only exchange that saw a net amount of withdrawals over the past few days, which could be linked to the buying power from U.S. customers.

Bitcoin (BTC) saw a minor drop to $24,700 following macro data, but it was quick to recover from losses. At the time of writing, the coin is recording a 1.27% increase over the past 24 hours. BlockchainCenter.net, a blockchain and crypto analytics platform, indicates that the Bitcoin season has come since only 13 out of 50 top cryptocurrencies performed better than Bitcoin over the past three months.

When the contagion spreads from the banking sector, risk-on assets may suffer losses in the short term. In spite of that, Edward Moya, senior market analyst at foreign exchange market maker Oanda, said that Credit Suisse is a bigger story than Silicon Valley Bank and Wall Street is “extremely nervous.” He added that despite Bitcoin’s decline, it is not significant compared to the pressure facing stocks, oil prices, and the euro. Earlier today, oil prices reached their lowest level since 2021, with WTI crude oil dropping to \(66 and Europe's Brent crude diving to \)73.

Ethereum (ETH) appears to be lagging behind Bitcoin as ETH/BTC dropped to 0.0067, a level not seen since mid-October 2022, while it recorded a 1.11% increase in price throughout the day.

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Top altcoin gainers and losers

Gainers:

THORChain RUNE (+45.71%)

GMX GMX (+6.34%)

SingularityNET AGIX (+5.89%)

Losers:

The Sandbox SAND (-9.77%)

PAX Gold PAXG (-9.75%)

Maker MKR (-9.16%)

NFT Market Map

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HV-MTL, Yuga Labs’ new NFT collection in the next stage of its Dookey Dash racing game, topped the leaderboard by trading volume today. BoredApeKennelClub (+209.29%) and SewerPass (+60.23%) posted significant gains in volume as participants rushed to join the summoning.

Yuga family collections, including MutantApeYachtClub (-22.66%) and Otherdeed (+5.19%), account for 5 out of the top 10 collections by volume traded due to the hype.

Coin360 Daily Digest

Here’s a rundown of the major crypto market news from today.

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For more daily updates and news, follow us on Twitter.

Disclaimer: None of the information here constitutes financial advice and market participants are advised to conduct their own research since cryptocurrencies are speculative assets with considerable risks.

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