Bitcoin Dominance Hits New Cycle High

Bitcoin dominance has reached a new cycle high, exceeding 61%, despite price corrections as investors pivot from altcoins. This shift is driven by stronger-than-expected U.S. job growth and the Federal Reserve’s hawkish stance.

According to Matrixport, the surge in Bitcoin (BTC) dominance is attributed to two key factors: the robust U.S. jobs report and the Federal Reserve’s increasingly hawkish approach. When job growth surpasses expectations, it indicates a strong economy, which usually leads to higher interest rates or delayed rate cuts. This reduces liquidity in financial markets, making borrowing more expensive and encouraging investors to turn to safer assets like Bitcoin, thus increasing its dominance despite price corrections.

Data from Matrixport shows that BTC dominance was at 60.3% on November 5 but dropped to 53.9% by December 9 as altcoins surged post the U.S. elections in November.

This trend is also evident in the overall crypto market cap. Matrixport’s analysis indicates that while the total market cap increased during the November altcoin rally, it began to decline as Bitcoin regained dominance. By early March, the crypto market cap had plummeted significantly from its post-election peak of $3.8 trillion in December (when BTC dominance was around 53%) to approximately $2.9 trillion, reflecting a contraction of about $900 billion and highlighting reduced liquidity within the crypto market.

Despite these challenges, Bitcoin has shown relative resilience compared to altcoins. Bitcoin’s price dropped by 24% from its all-time high of $109K achieved in January, whereas Ethereum (ETH) fell to $1895 in the past month, and Solana (SOL) suffered a 39% decline during the same period.

However, Bitcoin’s price correction indicates that the declining market cap is impacting its value. Given the Federal Reserve’s policies, Matrixport analysts suggest that maintaining significant price increases for Bitcoin will be challenging without increased liquidity. Any future gains will likely require more time and will be gradual, as the Fed’s actions may counterbalance the beneficial impacts of increased liquidity.

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