Bitcoin’s Dominance Rate Surges After U.S. Banking Crisis

Bitcoin’s Dominance Rate Surges After U.S. Banking Crisis – The proportion of the cryptocurrency market represented by Bitcoin (BTC), known as its dominance rate, has experienced a significant surge since the start of the current instability in the US banking sector nearly two months ago.

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TradingView, a charting platform, has recorded a rise in the dominance rate from 42% in early March to almost 49%, the highest it has been in 22 months. This indicates that Bitcoin has been performing better than other cryptocurrencies in the market. During the same period, the SPDR S&P regional banking ETF, designed to emulate an index based on regional U.S. banks, has experienced a significant drop of 35%.

In March, concerns of a complete banking crisis were sparked by the failure of three U.S. banks: Silicon Valley Bank (SVB), Signature Bank (SBNY), and Silvergate Bank (SI). The banking crisis continued as First Republic Bank (FRCB) also succumbed to the crisis. 

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Additionally, on Wednesday, the stock prices of PacWest Bancorp (PACW), a bank based in Los Angeles, fell by more than 60%, adding to the complications. Federal Reserve Chairman Jerome Powell has claimed that the banking sector is “sound and resilient.”

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Nevertheless, Lewis Harland, Portfolio Manager at Decentral Park Capital, believes that Bitcoin’s increasing market dominance during the instability of the banking sector and the decline in banking stocks demonstrate that the cryptocurrency is gaining popularity as an anti-U.S. dollar investment, similar to gold and oil, or as a bet on the dollar’s weakness.

“You see outperformance of BTC within the crypto market when regional bank share prices collapse. This signals that BTC is the high-quality anti-dollar liquid play for investors as the crisis unfolds further,” Harland told news outlet. The ongoing banking crisis has increased the likelihood of the Federal Reserve (Fed) implementing renewed liquidity easing measures, which could indicate a future weakening of the dollar. 

On Wednesday, the Fed raised interest rates by 25 basis points and left open the possibility of pausing in June. Harland suggests that if BTC’s dominance rate continues to approach the upper end of its multi-year range, it would indicate that Bitcoin will continue to perform better than other cryptocurrencies. A breakout beyond this range could result in further BTC outperformance. “Bitcoin dominance is looking to break its 3-year oscillation pattern,” Harland said. 

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“A break of 50% would likely signal a new market regime of prolonged BTC outperformance within the market.” According to data, Bitcoin has gained momentum since the March 10th announcement by Silicon Valley Bank regulators, rallying by 48% and reaching $29,100. This upward trend is reminiscent of Bitcoin’s positive performance during the 2013 Cyprus banking crisis.

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