A market dynamic that characterized the steep bitcoin and selling in the crypto market early this year is making a comeback: Traders are once again favoring dollars over the largest cryptocurrency.
This is evident from trends in their respective dominance rates, a measure of a cryptocurrency’s share of the total market capitalization of the digital asset market.
BTC’s dominance rate has pulled back to 60% from 61.20% since May 5th. At the same time, the dominance rate of Tether’s USDT, the largest dollar-pegged stablecoin, rose from 7% to 7.5%, while Circle Internet’s (CRCL) USDC, the second largest, rose from 2.8% to 3%.
In other words, money appears to be rotating back to tokenized versions of the US currency. That makes sense because bond markets suggest the Fed may keep interest rates higher longer than previously expected. Higher interest rates make dollar and dollar-linked investments attractive. Assets like bitcoin, meanwhile, offer no inherent return or cash flow.
This is not the first time this has happened this year. A similar scenario took place in late January, just before the selloff in BTC took off and drove prices down to $63,000 in early February. These trends must therefore be monitored closely.
Bitcoin recently traded near $75,900, after setting a low near $75,200 early today following reports of a large block trade involving BlackRock’s bitcoin ETF, IBIT. The transaction saw shares worth over a billion dollars change hands.
The 11 spot ETFs lost more than $333 million on Tuesday, following $2.26 billion in outflows over the past two weeks. Meanwhile, gold and precious metal funds have been pulling in investor money. Talk about rotation!
Ether (ETH), XRP, solana (SOL) and the CoinDesk 20 index are each down about 2% in 24 hours.
“If cryptocurrencies once again serve as a barometer of sentiment in global financial markets, this looks like an early signal of a turn towards profit-taking,” said Alex Kuptsikevich, chief market analyst at FxPro. “Perhaps investors prefer to take their money off the table before the start of summer, starting with the riskiest segment.”
In traditional markets, Nasdaq e-mini futures traded at record highs above 30,000 points, and WTI crude fell 3% to $90 a barrel. barrel. The US ADP employment report due today could add volatility to the markets. Pay attention!
Read more: For analysis of today’s activity in altcoins and derivatives, see Crypto Markets Today. For a comprehensive list of events this week, see CoinDesk’s “Crypto Week Ahead.”
What is trending
Today’s signal
The chart shows trends in dominance rates for bitcoin, USDT and USDC since May 5th.
While BTC’s share of the overall crypto market has declined, the dollar-pegged tokens’ shares have increased.
These diverging trends point to renewed trader preference for the US currency, a sign of capital flight to safety and potential risk aversion ahead.
