According to crypto asset manager SwissOne Capital, the U.S. Federal Reserve’s recent rate cut cycle could halt the long-term upward trend in Bitcoin’s (BTC) dominance. SwissOne Capital expects this development to lead to a broader rally in the crypto market, particularly benefiting altcoins.
Bitcoin Dominance Growth Slows Down
Over the past two years, Bitcoin’s dominance rate has risen from 38% to 58%, according to TradingView data. This increase shows that Bitcoin has outperformed the broader crypto market, contributing to the total cryptocurrency market value surpassing $2 trillion. However, SwissOne Capital suggests that with the Fed recently cutting rates by 50 basis points, Bitcoin’s dominance may face limited upside momentum.
SwissOne Capital’s market update notes that “Bitcoin dominance has historically shown a positive correlation with the Fed’s funding rate.” It also highlights how Bitcoin’s dominance fell after previous rate cut cycles, such as in the second half of 2019, when it peaked above 70% before declining as the Fed initiated its rate-cutting cycle.
Impact of the Easing Cycle on Altcoins
The rate cut cycle that began in the second half of 2019 was accompanied by trillions of dollars injected into the global economy by central banks and governments in response to the economic effects of the COVID-19 pandemic. During this period, risk appetite surged, particularly for altcoins, pushing Bitcoin’s dominance down to 40%. This positive correlation was also seen during the 2018 and 2022-23 rate hike cycles.
SwissOne Capital states, “The recent rate cut cycle in the U.S. suggests that Bitcoin’s dominance may not experience significant growth if history repeats itself.” According to the CME FedWatch tool, investors now anticipate another 25 basis point cut by the Fed by the end of the year.
While Bitcoin’s dominance has formed lower peaks since 2015, signaling broader market growth, it remains well below its previous high of 73%, despite the impressive rise over the past two years. This is largely attributed to the explosive growth of stablecoins, which now command a record $172 billion market capitalization.
SwissOne Capital further noted, “As stablecoins’ market capitalization approaches 10% of the total crypto market value, we believe Bitcoin dominance could peak between its current level and 60%, before a significant reversal begins.”
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Keywords: Bitcoin dominance, SwissOne Capital, altcoins, Fed rate cuts, market growth, Dey There
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