Why Bitcoin And Stablecoin Dominance Is On The Rise


Bitcoin and the crypto market are back in the red. The top crypto by market cap posts a 2% loss in the past 24 hours and could push other digital assets into critical support zones.

Related Reading | Bitcoin Indicator Hits All-Time Low Not Seen Since 2015

At the time of writing, Bitcoin is one of the best performing assets in this ranking, second only to Binance Coin (BNB) and Ethereum (ETH), according to data from Coingecko. BTC price is trading at $37,600 with a 7% loss over the past week.

BTC moving sideways on the 4 hour chart. Source: BTCUSD trading view

After a major outage in its network, Solana (SOL) posts a 16% loss and stands as the worst performing cryptocurrency by market cap. Terra’s native cryptocurrency LUNA follows closely behind with 15.5%.

These losses seem small compared to other cryptocurrencies in the top 100 by market cap. Tokens that were higher in the ranking, such as Shiba Inu (SHIB) and Avalanche (AVAX), are now registering up to 20% losses in a single week.

According to a recent report by Arcane Research, smaller cryptocurrencies have been underperforming in current market conditions. Investors appear to be fleeing to “safety” as risk appetite wanes ahead of a potential 50 basis point hike from the US Federal Reserve (FED).

While Bitcoin and the larger cryptocurrencies have shown a correlation with a 16% loss in April, the Arcane Research Small-Cap Index and Mid-Cap Index are both trending lower. The former registers a loss of 30% while the latter registers a loss of 29% in the same period.

In contrast, Bitcoin’s dominance has moved against small coins. This metric stands at 42% with a high probability of being extended as macro conditions continue to be unfavorable. Arcane Research noted:

Stablecoins are also seeing increasing dominance. UST has broken into the top 10, becoming the first algorithmic stablecoin to do so. We now have three stablecoins in the top 10 and 4 in the top 11, illustrating the current flight to safety trends in the market.

Bitcoin BTC BTC USD
Source: Arcane Research

What to expect from Bitcoin in the short term?

A separate report from FTX Access states that the market is pricing in 50bp hikes for the next four Fed meetings. This would put interest rates around 2 or 2.5 bps by the end of 2022.

Related Reading | Bitcoin Taker Buy-Sell Ratio Recovers in “Hold” Zone

In that sense, FTX Access affirms that unless there is a surprise from the financial institution, the market could see some relief:

Powell’s tone will be interesting but without going up +75bps or increasing the QT tempo it’s a high bar for an aggressive surprise. Some of this is cause for optimism, but unfortunately sentiment has bottomed out.