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⚡Bitcoin’s Market Dominance Wanes➿

Croxroad

12 Sep 2024 — 4 min read

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💵 Bitfinex Alpha Report

Bitfinex analysts are predicting a potential shift in the cryptocurrency market dynamics, as bitcoin’s dominance begins to decline and altcoins demonstrate resilience. In their latest Alpha report, they suggest that altcoins could outperform bitcoin in the coming months, especially if macroeconomic conditions improve. The report highlights several key indicators of this trend, including the growth in altcoin market capitalization, bitcoin’s shrinking dominance, and a notable reduction in speculative activity within the altcoin space.

According to the report, bitcoin dominance – which measures the market capitalization of bitcoin against the rest of the cryptocurrency market – fell by 1.3% last week, while the market cap of other crypto assets, excluding the top 10, grew by 4.4%. This shift hints at a potential regime change, where investors may be turning to altcoins in search of value, deviating from the traditional pattern of flocking to bitcoin during market downturns. Additionally, altcoin open interest has dropped by 55% from its all-time high, signaling reduced speculation and possible seller exhaustion.

While the ETH/BTC ratio remains below its 365-day Simple Moving Average, indicating Ethereum’s continued underperformance since the Merge, Bitfinex analysts remain optimistic about the potential for a broader altcoin rally. The report suggests that if bitcoin dominance has peaked, altcoins could see significant gains in the months ahead, particularly if macroeconomic pressures, such as inflation, ease. A bullish Q4 for altcoins could be on the horizon, driven by a combination of improving economic conditions and reduced outflows from bitcoin ETFs.

🤺 Higher Core Inflation

The U.S. Consumer Price Index (CPI) for August matched expectations, rising 0.2%, but the core CPI, which excludes food and energy costs, increased by 0.3%, outpacing forecasts. This rise in the core rate is seen as a key factor likely influencing the Federal Reserve’s decision to cut its benchmark lending rate by only 25 basis points in its upcoming meeting. Year-over-year, CPI came in at 2.5%, slightly lower than the expected 2.6%, while core inflation held at 3.2%, in line with projections. The persistence of core inflation has increased the probability of a modest rate cut, reinforcing expectations that the Fed will opt for a more conservative approach.

In response to the inflation report, market reactions were mixed. Bitcoin (BTC), which had been down before the data release, dipped further, falling 1.5% to $56,500. Traditional markets also saw shifts, with the S&P 500 and Nasdaq futures both down 0.5%. The U.S. 10-year Treasury yield rose by 3 basis points to 3.68%, while the dollar index climbed 0.15%. Meanwhile, gold prices fell by 0.45%, reaching $2,532 per ounce. These market movements reflect investor concerns over the persistent inflationary pressures, particularly within the core rate, which has weighed on expectations for aggressive monetary policy changes.

Prior to the CPI data, investors had priced in a 71% chance of a 25-basis-point rate cut, with a smaller chance of a more substantial 50-basis-point reduction. However, following the report, the likelihood of the Fed opting for the smaller 25-basis-point cut surged to 85%. Looking ahead, market participants now see a higher probability that the Fed will trim rates by just 75 basis points by year-end, a slight increase from prior expectations. The inflation data has solidified the view that while the Fed may move cautiously, it remains focused on addressing persistent inflationary risks.

🌎 The Real-World Use of Bitcoin as a Payment Method

Bitcoin's real-world use as a payment method is gaining traction, evolving from just an investment asset to a practical way to pay for goods and services. With a growing number of merchants accepting bitcoin, customers can now use the cryptocurrency for everyday transactions, ranging from online purchases to in-store payments. This shift is expanding the utility of digital currency, offering more flexibility and efficiency for consumers in the global marketplace.

🤣 Crox Road Memes

“By accepting bitcoin, businesses can open themselves up to a global market and provide more payment options for their customers.”

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