The crypto market has been moving in the red during today’s trading session with Bitcoin and Ethereum giving back last week’s gains. The first cryptocurrency by market capitalization seems to be reacting to the meeting of the Federal Open Market Committee (FOME) scheduled for tomorrow.

During this event, the US Federal Reserve (Fed) is expected to potentially announce an increase in interest rates. The forecast pointed to a hike of 75 basis points (bp), but the financial entity could surprise the market with a hike of 100 bp in an attempt to reduce inflation.

The consumer price index (CPI), a metric used to measure inflation in US dollars, is at a 40-year high. This has forced the Fed to change its monetary policy by raising interest rates, reducing its balance sheet and removing liquidity from global markets.

As a consequence, Bitcoin and the crypto market have been trending down. The benchmark crypto underwent a period of relative stability when it was able to stabilize around $20,000, the current price level of BTC.

The altcoin sector was less fortunate as Ethereum (ETH), Cardano (ADA), Solana (SOL), and other major cryptocurrencies broke below critical resistance. Some altcoins return to their 2020 levels as Bitcoin dominance trended higher.

This is an indication of the uncertainty and risk-off sentiment in the crypto market. The metric saw a decline in the last two weeks due to expectations of mitigating inflation, supported by a drop in commodity prices and the announcement of a date for the Ethereum “Merger”.

Data from Arcane Research backs this up, as the research firm sees a decline in the performance of its large-, mid-, and small-cap index. As seen below, these indices have been posting bigger losses than Bitcoin as BTC Dominance picks up some bullish momentum.

Source: Arcane Research

Bitcoin Dominance Spike Suggests Crypto Market Uncertainty

Arcane Research noted that the overall weakness in the sector is driven by a “natural rotation as traders seek safety in a bear market.” The rise in Bitcoin dominance has been accompanied by an increase in the overall market share of stablecoins.

In other words, market participants are buying Bitcoin and stablecoins to protect themselves from potential downside risks. The report said:

Ether’s lack of strength relative to Bitcoin has caused its market dominance to drop 0.34% over the past week. On the other hand, Bitcoin has seen its market share increase by 0.47%. This is a natural rotation as the market declines, as investors perceive Bitcoin as a lower risk asset than Ether.

Tomorrow’s FOMC meeting will decide the short-term fate of BTC dominance and the fate of the larger cryptocurrencies.

BTC price is moving sideways on the 4-hour chart. Source: BTCUSDT Tradingview

This post Bitcoin Dominance Grows as Crypto Risk Appetite Remains Low

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