The crypto market is pulling back into support and could face potential headwinds in the short term. In the crypto top 10, Bitcoin has been outperformed by the altcoins sector with Ethereum and Binance Coin, and Polkadot still preserving some of its gains from the past week.
This shows a shift in the crypto market dynamics as investors seem to be regaining confidence in the sector and moving away from Bitcoin. Therefore, the number one crypto by market cap appears to be lagging which translates into a decline in Bitcoin dominance.
As seen below, this metric has been moving sideways since May 2022 after seeing a small push to the upside. In 2021, as Ethereum and other altcoins reached new all-time highs, Bitcoin dominance plummeted to its current levels.
BTC dominance moving sideways as BTC’s price lags the altcoins sector on the 4-hour chart. Source:
If the current trends continue, Bitcoin lagging the altcoin sector, the metric could re-test its yearly lows and drop from 43% into the high 30% area which could provide altcoins with more room to reclaim previously lost territory.
According to a report from Arcane Research, their Crypto Indexes for altcoins have been showing positive returns in August. As seen below, the research firm records 9%, 7%, and 5% profits for their Large, Mid, and Small Cap Index while Bitcoin records 2% profits.
Source: Arcane Research
The latter shows the biggest increase as risk exposure trends upwards, and stablecoins market shares follow a similar trajectory as that of the Bitcoin dominance. Arcane Research noted:
With bitcoin underperforming relative to altcoins, the bitcoin dominance has plummeted from a peak of 47% in the middle of June to 40.5% now. As the market sentiment has improved traders have been more interested in getting exposure to altcoins than bitcoin.
In the crypto market, altcoins might continue to dominate in the short as BTC’s price moves sideways. Thus, investors seeking higher returns might consider rotating into Large to Mid-cap cryptocurrencies, and Small Cap if they have bigger risk tolerance.
Why Is The Crypto Market Seeing Short-Term Downside Price Action
Despite a positive month for the majority of the crypto market, most cryptocurrencies are experiencing downside price action on low timeframes. This is due to the potential short-term impact of the macro-economic factors affecting the sector.
Tomorrow, the U.S. Federal Reserve (Fed) will release July’s Consumer Price Index (CPI) print. This metric is used to measure inflation in the U.S. dollar, which has been trending upwards and stood at a 40-year high.
Thus, the Fed has been hiking interest rates and shifting its monetary policy in an attempt to slow down inflation. If July’s CPI print hints at success in those attempts, the financial institution might be inclined to act less aggressively.
This could lead to a stronger bullish momentum across risk-on assets, such as Bitcoin and the crypto market. In the meantime, market participants seem to be sidelined and expecting tomorrow’s outcome. A pseudonym trader the following on the above:
CPI relation with Bitcoin. Now that gas prices are lowering, we’ll see a decrease or inflation holding/cooling. This will give confidence back to investors. Fed rate lowers to 50 bps at next FOMC meeting, showing optimism to investors. Don’t get shaken out before the move up.
A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.
Disclaimer: The information found on NewsBTC is for educational purposes
only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any
investments and naturally investing carries risks. You are advised to conduct your own
research before making any investment decisions. Use information provided on this website
entirely at your own risk.
