Connect with us

Bitcoin

Bitcoin trading dominance hits 2017-levels not seen since $20,000 BTC

Published

on


The cryptocurrency market has suddenly shifted back to Bitcoin (BTC) after several months of a decentralized finance (DeFi) frenzy. While market cap dominance remains below 60%, earlier this month, the trading dominance of BTC has spiked to levels not seen since 2017 when the price hit an all-time high at $20,000.

The trading dominance of Bitcoin against other major cryptocurrencies. Source: TheTie

Due to the growing dominance of Bitcoin in terms of market volume, the alternative cryptocurrency (altcoin) market is stagnating. The trading dominance of the bellwether for altcoins, Ether (ETH), for instance, did not see a similar spike in the same period. 

Why does the altcoin market underperform when Bitcoin is going up?

As seen from July to early September, when Bitcoin is climbing upwards gradually, it can cause an “altseason” to materialize. In fact, ETH has outperformed BTC so far this year in terms of percentage, which is partially why the momentum may be returning back to Bitcoin. 

Bitcoin and Ethereum YTD Performance

Especially during August, many DeFi tokens increased between 5 to 20-fold, causing a massive altcoin craze.

But when the price of Bitcoin goes up quickly in a short period, it can cause the altcoin market to slump. Profits are likely cycling in from altcoins back into stablecoins and Bitcoin, leading BTC to rally by itself.

Su Zhu, the CEO of Three Arrows Capital, emphasized that Bitcoin going up quickly could be bearish for altcoins. He explained:

“BTC going up swiftly is not only not bullish for alts but it’s bearish. Reasons for this are myriad but boil down to the fact that money is a coordination game and Bitcoin is the Schelling point; this is independent of how you feel about it, community is literally irrelevant.”

A similar trend has been spotted across major cryptocurrency exchanges. On Huobi, Bitcoin trading volume’s market share has been increasing, as shown by the data from Skew.

The share of major cryptocurrency volume on Huobi

The share of major cryptocurrency volume on Huobi. Source: Skew

The trading data on Huobi is significant because the exchange has 1.1% of the Bitcoin supply in its cold wallet. It remains one of the biggest exchanges in the world in terms of cryptocurrency reserves, alongside OKEx and Binance.

What does this indicate for BTC?

In the past 13 days, the price of Bitcoin has increased by more than 12% against the U.S. dollar. The strong performance of BTC comes after a series of negative events that could have caused a major pullback.

As Cointelegraph extensively reported, several exchange-related news, including the suspension of withdrawals by OKEx, caused BTC to drop below $11,300. Despite the uncertainty in the market and the slump of U.S. equities, BTC pushed above $11,700.

Analysts remain relatively confident in the optimistic medium-term trajectory of Bitcoin. But if BTC pulls back in the short term as the market seeks for relief, it could cause a bigger altcoin correction.

A potential Bitcoin scenario in the medium-term

A potential Bitcoin scenario in the medium-term. Source: Michael van de Poppe

Michael van de Poppe, a full-time trader at the Amsterdam Stock Exchange, believes BTC would likely drop back to $11,100. Referring to a chart that expects a BTC pullback to $11.1K. He wrote:

“Still standing behind this view, there’s such a big hurdle coming up for $BTC.”





Source link

Bitcoin

Bitcoin may lose $30K price level if stocks tank, analysts warn

Published

on

By


The ghost of stock market crash is back again to haunt Bitcoin (BTC).

It happened last in March 2020. Back then, the prospect of the fast-spreading coronavirus pandemic led to lockdowns across developed and emerging economies. In turn, global stocks crashed in tandem, and Bitcoin lost half of its value in just two days.

Meanwhile, the U.S .dollar index, or DXY, which represents the greenback’s strength against a basket of top foreign currencies, has now climbed by 8.78% to 102.992, its highest level since January 2017.

The huge inverse correlation showed that investors dumped their stocks and Bitcoin holdings and sought safety in what they thought was a better haven: the greenback. 

More than a year later, Bitcoin and stock markets again wrestle with a similar bearish sentiment, this time led by a renewed demand for the U.S. dollar following the Federal Reserve’s hawkish tone.

Namely, the U.S. central bank announced Wednesday it will start hiking its benchmark interest rates by the end of 2023, a year earlier than planned.

Lower interest rates helped to pull Bitcoin and the U.S. stock market out of their bearish slumber. The benchmark cryptocurrency jumped from $3,858 in March 2020 to almost $65,000 in April 2021 as the Fed pushed lending rates to the 0%-0.25% range.

Meanwhile, the S&P 500 index rose more than 95% to 4,257.16 from its mid-March 2020 peak. Dow Jones and Nasdaq rallied similarly, as shown in the chart below.

Bitcoin, Nasdaq Composite, S&P 500, and Dow Jones rose in sync after March 2020 crash. Source: TradingView.com

And this is what happened after the Federal Reserve’s rate-hike announcement on Wednesday…

Bitcoin and the US stock market plunged after the Fed’s rate hike update. Source: TradingView.com

Meanwhile, the U.S. dollar index jumped to its two-month high, hinting at a renewed appetite for the greenback in global markets.

U.S. dollar index jumped up to 2.06% after rate hike announcement. Source: TradingView.com

Popular on-chain analyst Willy Woo said on Friday that a stock market crash coupled with a rising dollar could increase Bitcoin’s bearish outlook. 

“Some downside risk if stonks tank, a lot of rallying in the DXY (USD strength) which is typical of money moving to safety,” he explained. 

Michael Burry, the head of Scion Asset Management, also sounded the alarm on an imminent Bitcoin and stock market crash, adding that when crypto markets fall from trillions, or when meme stocks fall from billions, the Main Street losses will approach the size of countries.

“The problem with crypto, as in most things, is the leverage,” he tweeted. “If you don’t know how much leverage is in crypto, you don’t know anything about crypto.”

Burry deleted his tweets later.

Some bullish hopes

Away from the price action, Bitcoin’s adoption continues to grow, an upside catalyst that was missing during the March 2020 crash.

On Friday, CNBC reported that Goldman Sachs has started trading Bitcoin Futures with Galaxy Digital, a crypto merchant bank headed by former hedge fund tycoon Mike Novogratz. The financial news service claimed that Goldman’s call to hire Galaxy as its liquidity provider came in response to increasing pressure from its wealthy clients.

Related: Hawkish Fed comments push Bitcoin price and stocks lower again

Damien Vanderwilt, co-president of Galaxy Digital, added that the mainstream adoption would help Bitcoin lower its infamous price volatility, paving the way for institutional players to join the crypto bandwagon. Excerpts from his interview with CNBC:

“Once one bank is out there doing this, the other banks will have [fear of missing out] and they’ll get on-boarded because their clients have been asking for it.”

Earlier, other major financial and banking services, including Morgan Stanley, PayPal, and Bank of New York Mellon, also launched crypto-enabled services for their clients.

Is Bitcoin in a bear market? 

Referring to the question “are we in a bear market?” Woo said that Bitcoin adoption continues to look healthy despite the recent price drop. The analyst cited on-chain indicators to show an increasing user growth and capital injection in the Bitcoin market.

He also noted that the recent Bitcoin sell-off merely transported BTC from weak hands to strong hands. 

7-day moving average of coins moving between strong and weak hands. Source: Willy Woo

Woo reminded:

“My only concern for downside risk is if we get a major correction in equities which will pull BTC price downwards no matter what the on-chain fundamentals may suggest. Noticing USD strength on the DXY, which suggest some investors moving to safety in the USD.”