Altcoin
Bitcoin sucking liquidity from altcoins?
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- Bitcoin price continues its sideways movement around the psychological level of $70,000.
- Bitcoin dominance is increasing ahead of the fourth BTC halving.
- Capital rotation due to higher interest rates for a longer period could push capital to rotate back into BTC.
The price of Bitcoin (BTC) remained limited by distance since reaching an all-time high of $73,949 on March 14. Not all altcoins are showing the same strength, which can be attributed to BTC’s lackluster performance, but this consolidation could soon lead to a massive volatile move that could be detrimental to altcoins.
Read also: The strength of the US dollar could be one of the reasons why Bitcoin could fall further
Connection of cryptocurrencies with macroeconomic events
Bitcoin was very sensitive to macroeconomic events in 2021 and 2022, but this connection broke down in early 2023. Recent employment data showed a surprising rally after the Fed decided to keep the interest rate unchanged in the previous month. The United States Consumer price index Data (CPI) for March showed that headline inflation stood at 3.5% year-on-year, higher than economists had expected. All this data indicates that inflation is still high, although not as high as in 2023.
The CME FedWatch tool shows that these events have affected the expected timing of rate cuts, which has moved from June to September. The probability of a 25 basis point rate cut in September is currently 45.7%.
FedWatch tool for ECM
High interest rates will likely halt the altcoin rally
In the past, interest rates remaining higher for a longer period has inadvertently caused capital to shift from risky bets to stable, non-risky bets. In the case of the stock market, capital moves from small caps to large caps or blue chips. This is because higher interest rates eventually cause overly exposed companies to fail.
If this analogy is applied to the cryptocurrency landscape, then capital should ideally shift from risky altcoin bets to relatively stable cryptocurrencies like Bitcoin and Bitcoin. Ethereum.
Additionally, there are two other considerations that need to be taken into account: the rise of Bitcoin dominance and the fourth BTC halving.
The growing dominance of Bitcoin confirms the interest rate hypothesis made above. Altcoins, in general, have shown weakness over the past month, correcting to double digits or moving sideways. Only a select few cryptocurrencies are performing exceptionally well. Currently, BTC’s dominance stands at 54.47%, producing equal highs and rising lows. In the coming days, investors can expect dominance to rise to 56.62%.
BTC dominance
Furthermore, as the Bitcoin halving event approaches, altcoins usually tend to lose steam and correct themselves. So, to conclude, capital turnover is likely to drain liquidity from altcoins and send it to Bitcoin.
To know more: Only a few days left until the Bitcoin halving. Here’s what leading members of the crypto community are saying
- Bitcoin price continues its sideways movement around the psychological level of $70,000.
- Bitcoin dominance is increasing ahead of the fourth BTC halving.
- Capital rotation due to higher interest rates for a longer period could push capital to rotate back into BTC.
The price of Bitcoin (BTC) remained limited by distance since reaching an all-time high of $73,949 on March 14. Not all altcoins are showing the same strength, which can be attributed to BTC’s lackluster performance, but this consolidation could soon lead to a massive volatile move that could be detrimental to altcoins.
Read also: The strength of the US dollar could be one of the reasons why Bitcoin could fall further
Connection of cryptocurrencies with macroeconomic events
Bitcoin was very sensitive to macroeconomic events in 2021 and 2022, but this connection broke down in early 2023. Recent employment data showed a surprising rally after the Fed decided to keep the interest rate unchanged in the previous month. The United States Consumer price index Data (CPI) for March showed that headline inflation stood at 3.5% year-on-year, higher than economists had expected. All this data indicates that inflation is still high, although not as high as in 2023.
The CME FedWatch tool shows that these events have affected the expected timing of rate cuts, which has moved from June to September. The probability of a 25 basis point rate cut in September is currently 45.7%.
FedWatch tool for ECM
High interest rates will likely halt the altcoin rally
In the past, interest rates remaining higher for a longer period has inadvertently caused capital to shift from risky bets to stable, non-risky bets. In the case of the stock market, capital moves from small caps to large caps or blue chips. This is because higher interest rates eventually cause overly exposed companies to fail.
If this analogy is applied to the cryptocurrency landscape, then capital should ideally shift from risky altcoin bets to relatively stable cryptocurrencies like Bitcoin and Bitcoin. Ethereum.
Additionally, there are two other considerations that need to be taken into account: the rise of Bitcoin dominance and the fourth BTC halving.
The growing dominance of Bitcoin confirms the interest rate hypothesis made above. Altcoins, in general, have shown weakness over the past month, correcting to double digits or moving sideways. Only a select few cryptocurrencies are performing exceptionally well. Currently, BTC’s dominance stands at 54.47%, producing equal highs and rising lows. In the coming days, investors can expect dominance to rise to 56.62%.
BTC dominance
Furthermore, as the Bitcoin halving event approaches, altcoins usually tend to lose steam and correct themselves. So, to conclude, capital turnover is likely to drain liquidity from altcoins and send it to Bitcoin.
To know more: Only a few days left until the Bitcoin halving. Here’s what leading members of the crypto community are saying