Bitcoin dominance hit a new cycle high despite price correction as investors shift from altcoins, driven by stronger-than-expected U.S. job growth and the Federal Reserve’s hawkish stance.
According to Matrixport, Bitcoin (BTC) dominance has surged to a new cycle high, surpassing 61%. Matrixport attributed this to two factors: a stronger-than-expected U.S. jobs report as well as the Federal Reserve’s increasingly hawkish stance. When job growth exceeds expectations, it suggests the economy is performing well. This often translates to higher interest rates or a delay in rate cuts, which reduces liquidity in financial markets. Higher interest rates then make borrowing more expensive, encouraging investors to shift from alt coins to safer assets (hence, the increase in Bitcoin dominance despite the price correction). According to Matrixport chart, BTC dominance was at 60.3% on Nov. 5, but it fell to %53.9 by Dec. 9 as altcoins surged after the U.S. elections in November.
This shift is also reflected in the overall crypto market cap trend. According to Matrixport’s chart, the total market cap saw an increase during the November altcoin rally but began declining as Bitcoin regained dominance. By early March, the crypto marketcap has crashed significantly from its post-election peak of $3.8 trillion in Dec. (when BTC dominance was around 53%) to approximately $2.9 trillion. This represents a drop of about $900 billion, which highlights a significant contraction in the crypto market liquidity.
Despite this, Bitcoin remained relatively resilient compared to altcoins. To put it into perspective, Bitcoin price declined by 24% from its all-time high of $109K achieved in January. Ethereum (ETH), however, dropped to $1895 in the past month, while Solana (SOL) has bled 39% in the same period.
Despite its relative resilience, however, Bitcoin price correction aligns with the declining market cap, suggesting that liquidity dry-up is weighing on its price. Because of the Federal Reserve’s stance, Matrixport analysts believe it will be difficult for Bitcoin to sustain significant price increases based purely on increased liquidity. Any further gains will likely take “more patience,” meaning investors will have to wait longer and the increase will likely be gradual. The Fed’s actions might counteract the positive effects of increased liquidity.
