Bitcoin’s dominance has plunged since the number one crypto by market capitalization underperformed altcoins. The metric, used to measure the percentage of crypto market capitalization formed by BTC, was trending higher but appears to be changing direction and could portend more losses for the industry.
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According to a report from Arcane Research, Bitcoin moved sideways along the $21,000 zone with a 3% profit over the past week. At the time of writing, the price of BTC is trading at $20,300 and may be on the verge of retesting previous support levels.
Over the same period, Arcane Research noted, Ethereum (ETH) and Binance Coin (BNB) posted a profit of at least 10%. This represents ETH price the first week in the green since the massive selling pressure began in the sector on March 28.
In the meantime, as the price of BTC moves in a tight range, US stocks have seen gains. The S&P 500 and the Nasdaq 100 have seen up to 6% in profits over the past week. Stocks are starting to fall and could hint at further losses in the crypto market.
Regarding the factors affecting the price performance of BTC, Arcane Research wrote the following:
Bitcoin’s relative underperformance against stocks and altcoins in this highly correlated environment is likely caused by ever-increasing contagion effects from the collapse of UST and 3AC (…).
The fallout from these events created hurdles for centralized lending companies. Many have become forced sellers as they liquidate assets in an effort to service debts. Arcane Research added:
The market is paying close attention to how the current imbalances are resolved, putting a tight leash on BTC’s ability to see substantial recovery.
Why Bitcoin could come out on top against stocks
Bitcoin is moving in tandem with traditional equities, but the cryptocurrency could outperform them in the second half of 2022. The downtrend was mainly triggered by the factors mentioned above and a change in monetary policy on the part of the US Federal Reserve (Fed).
The financial institution attempts to slow inflation by raising interest rates. As deflationary pressure emerges, which could result in another rally for Bitcoin in the coming months, according to Senior Commodity Strategist Mike McGlone:
#Stocks too hot compared to the maturation of Bitcoin? The fall in risky assets in 1H is driving inflation at a blistering pace, which could translate into a resurgence of pre-pandemic deflationary forces in 2H. The main beneficiaries of this scenario could be gold, Bitcoin and long-term US Treasury bonds.