Daily News | Bitcoin Dominance Surges, Altcoins Plunge Amid Central Bank Meetings and Inflation Concerns

Crypto Daily Digest: Bitcoin Dominance Rises as Crypto Market Faces Volatility

In a recent turn of events, Bitcoin‘s dominance in the cryptocurrency market has surged to nearly 50%, reaching its highest level since April 2021. This upswing coincided with significant losses experienced by alternative cryptocurrencies, such as SOL, MATIC, DOGE, and ADA. Market rumors suggest that these losses were triggered by a proprietary trading firm’s massive $2 billion portfolio dump.

While altcoins suffered double-digit losses, Bitcoin demonstrated resilience with only a 3% decline. This relative outperformance can be attributed to increased demand from investors seeking a safe haven amid the market turmoil. Notably, this trend of investors flocking to major cryptocurrencies before potential market crashes is indicative of a flight to safety.

Bitcoin’s dominance has steadily risen since November, with a notable surge during the March U.S. banking crisis. The latest increase in dominance suggests that Bitcoin is poised for continued outperformance in the coming months. This development signals a potential break from the three-year oscillation pattern observed in Bitcoin’s dominance rate, further bolstering confidence in its performance.

Amidst these market movements, Tether, the world’s largest dollar-pegged stablecoin, also experienced an uptick in dominance, reaching its highest level since January 8. This indicates that investors are gravitating towards stablecoins as a safe haven asset during periods of market volatility.

In a separate development, major tokens across various blockchain networks faced a substantial slide, with losses exceeding 20% since last Friday. The plunge can be attributed to a risk-off event triggered by recent lawsuits filed by the U.S. Securities and Exchange Commission (SEC) against crypto exchanges Binance and Coinbase. The SEC’s allegations that 13 tokens, including SOL, MATIC, ADA, and others, are securities have caused market jitters and fueled the sell-off.

As a result of the SEC filings, platforms like Robinhood have ceased support for tokens affected by the regulatory action, adding further uncertainty to the market. The repercussions were felt across the crypto futures market, with nearly $300 million in liquidations, surpassing the previous nine-month record.

Blockchain data analysis revealed that key market makers, including Jump Trading and Cumberland, sent substantial amounts of Polygon (MATIC) to various crypto exchanges. This influx of tokens, possibly sold amid illiquid market conditions, contributed to the sharp decline in MATIC’s price. Similar price movements were observed in Cardano (ADA) and Solana (SOL) tokens, which also experienced significant drops.

Despite the current volatility, Hong Kong is making strides to position itself as a crypto-friendly jurisdiction. Legislative Council member Johnny Ng has extended an invitation to Coinbase and other crypto exchanges, urging them to establish operations in the region. Hong Kong has been actively formulating regulations and implementing compliance measures to foster the growth of the cryptocurrency industry. The Hong Kong Monetary Authority (HKMA) recently announced plans to explore the introduction of a retail central bank digital currency (CBDC) and facilitate customer access to cryptocurrency exchanges.

The favorable crypto stance in Hong Kong has attracted interest from international technology companies. South Korean tech giant Samsung, for instance, introduced a Bitcoin futures active exchange-traded fund on the Stock Exchange of Hong Kong earlier this year. Furthermore, recognition from Chinese government officials further underscores the significance of Hong Kong’s initiatives in the broader digital currency landscape.

Bitcoin (BTC) $25,879 (+0.15%) - Neutral Outlook

Overview:

• Closest daily support zone: 25818 - 25360
• Closest daily resistance zone: 26280 - 26700
• Key Level: 25270 (Daily 200EMA)

Daily Resistance zones

1. 26280 - 26700
2. 26970 - 27265
3. 27790 - 28420

Daily Support zones

1. 25818 - 25360
2. 25240 - 24270
3. 23855 - 23470

Macro: Fed’s Pause Plan in Focus as Traders Eye Central Bank Meetings

Asian equities are poised for a cautious start as traders awaited key interest rate decisions from central banks. While Japanese stocks were projected to experience a slight gain, Hong Kong stocks were anticipated to see a minor decline. Australian markets remained closed for a holiday, adding to the subdued trading sentiment.

Technology shares, on the other hand, continued their upward trajectory as investors bet on the US Federal Reserve nearing the end of its rate hiking cycle. This sentiment was supported by positioning in rates markets, which suggested the likelihood of one more hike, potentially in the following month rather than at the upcoming meeting. However, concerns loomed over the potential repercussions of the Fed’s past rate increases, with bond managers, including Fidelity International and Allianz Global Investors, warning of an impending economic downturn. The unexpected rate hikes by the Bank of Canada and the Reserve Bank of Australia in the previous week further added an element of uncertainty.

This week is packed with central bank decisions. The European Central Bank is expected to raise its benchmark rate on Thursday, while there is a possibility of China cutting its medium-term lending facility on the same day. The Bank of Japan, however, is anticipated to maintain its current stance and keep rates unchanged on Friday.

In the currency markets, major currencies like the dollar, yen, euro, and offshore yuan traded in narrow ranges, indicating a lack of significant volatility. Meanwhile, in the bond market, Treasury yields saw a slight increase after disappointing employment data from Canada, which revealed minor job losses in May, signaling weakness in the labor market.

All eyes are now on the upcoming Federal Reserve meeting. It was widely expected that the Fed would keep interest rates unchanged, signaling a pause in its rate-hiking cycle. The central bank’s decision would serve as an opportunity to assess the recent strains in the banking sector and uate the progress made in curbing inflation. However, some officials within the Fed expressed concerns that inflation progress had stalled and believed that further measures might be necessary to cool the resilient economy.

However, the Fed’s recent data on inflation and labor-market strength, combined with the signals provided by Chair Jerome Powell and Governor Phillip Jefferson, had shifted market expectations. What was initially seen as a pause in rate hikes was now being reconsidered, with the possibility of a rate increase in July gaining traction. Powell faced the challenging task of effectively communicating the Fed’s intentions, especially if the decision to pause was made. The release of the May consumer price index report, coinciding with the meeting, could further influence the Fed’s decision-making process. A higher reading in the inflation report might prompt policymakers to abandon the pause plan and move forward with another 25-basis-point rate hike.