Bitcoin dominance has taken a dive since the number one crypto by market cap underperforms altcoins. The metric, used to measure the percentage of the crypto market cap formed by BTC, was trending to the upside but seems to be changing direction and could hint at more losses for the industry.
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According to a report from Arcane Research, Bitcoin has been moving sideways along the $21,000 area with a 3% profit over the past week. At the time of writing, BTC’s price trades at $20,300 and could be about to re-test previous support levels.
Over the same period, Arcane Research noted, Ethereum (ETH) and Binance Coin (BNB) have seen at least a 10% profit. This represents ETH’s price first week in the green since the start of the massive selling pressure across the sector on March 28.
In the meantime, as BTC’s price moves in a tight range, U.S. equities experienced some gains. The S&P 500 Index and the Nasdaq 100 saw as much as a 6% profit over the past week. Equities are beginning to take a turn to the downside and could be hinting at further losses in the crypto market.
On the factors impacting BTC’s price performance, Arcane Research wrote the following:
Bitcoin’s relative underperformance to both equities and altcoins in this highly correlated environment is likely caused by the ever-growing contagion effects related to UST and 3AC’s collapse (…).
The fallout from these events has brought hurdles for centralized lending companies. Many have become forced sellers as they liquidate assets in an attempt to honor withstanding debt obligations. Arcane Research added:
The market is paying close attention to how the current imbalances are resolved, putting a tight leash on BTC’s ability to see a substantial recovery.
Why Bitcoin Could Come Out On Top Against Stocks
Bitcoin has been moving in tandem with traditional equities, but the cryptocurrency could outperform them in the second half of 2022. The downside trend has been mainly triggered by the factors mentioned above and by a shift in monetary policy from the U.S. Federal Reserve (Fed).
The financial institution is trying to slow down inflation by hiking interest rates. As deflationary pressure emerges, which could translate into another rally for Bitcoin in the coming months, according to Senior Commodity Strategist Mike McGlone:
Too Hot #Stocks vs. Maturing Bitcoin? Plunging risk assets in 1H are taking away inflation at a breakneck pace, which may translate into pre-pandemic deflationary forces resurfacing in 2H. Primary beneficiaries of this scenario may be gold, Bitcoin and US Treasury long-bonds.