Bitcoin has shown resilience in comparison to the broader digital assets market, maintaining a dominance metric of 55.3%, the highest level since April 2021. Matteo Greco, a research analyst at digital asset investment firm Fineqia International, noted that Bitcoin’s market cap dominance has hit its highest level in three years despite recent sell-offs and market volatility. Trading volumes have remained robust, with BTC Spot ETFs recording a weekly trading volume of approximately $16.2 billion and a cumulative trading volume of around $212 billion since its inception. Despite ending the week at around $65,650 with a 5.3% decline from the previous week, Bitcoin faced notable volatility during the weekend following a period of relative stability from Monday to Thursday.
The weekend’s price drop was attributed to geopolitical tensions in the Middle East, with market sentiment improving after an announcement of a temporary halt in hostilities among the involved nations. The upcoming halving event, scheduled for the night between April 19th and 20th, has drawn attention, as historical data indicates that previous halving events have been followed by upward trends. However, short-term bearish sentiment was reflected in the net outflow of $85 million from Bitcoin Spot ETFs during the week, with investors displaying caution and engaging in profit-taking following the strong uptrend witnessed in Q4 2023 and Q1 2024.
On the macroeconomic front, recent US inflation data surpassed expectations, leading to a revision in market participants’ rate cut projections for 2024. Initial expectations included a reduction of at least 75 basis points in interest rates, but the latest data has shifted projections to anticipate 25/50 basis points cuts during the year, with the first cut expected in Q3 and a potential second cut towards year-end. The presence of inflation levels surpassing central banks’ targets could result in a prolonged period of tighter monetary policy, contributing to short-term challenges faced by risk-on assets as investors realign their portfolios in response to revised mid-term expectations influenced by the latest financial indicators.
In terms of digital asset investment products, minor outflows of $126 million were witnessed in the past week, with Bitcoin experiencing outflows of $110 million but maintaining positive inflows of $555 million month-to-date. Short-bitcoin, which had been witnessing outflows for the past three weeks, saw minor inflows of $1.7 million, likely capitalizing on the recent price weakness. Bitcoin’s value proposition strengthens as fiat currencies weaken, while stablecoins may lose value in line with fiat currency inflation. Overall, Bitcoin’s dominance in the digital assets market and its resilience in the face of market volatility and macroeconomic challenges indicate a positive outlook for the cryptocurrency in the near future.
