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According to leading crypto asset management firm SwissOne Capital, the ongoing rise in Bitcoin’s (BTC) dominance rate may face a significant challenge due to the Federal Reserve’s recent rate cut cycle.
Historically, Bitcoin dominance and U.S. interest rates have shown a positive correlation, suggesting that further rate cuts could potentially halt the current upward trend in Bitcoin’s market share.
Bitcoin’s Market Performance and Potential Setbacks
Over the past two years, Bitcoin’s dominance rate surged from 38% to 58%, outperforming the broader cryptocurrency market. This rise coincided with the total market size of digital assets doubling to over $2 trillion, according to TradingView data.
However, SwissOne Capital has raised a crucial concern: the Federal Reserve’s decision to cut interest rates by 50 basis points signals the start of a loosening cycle. According to the firm’s market update, previous cycles like this have historically aligned with a drop in Bitcoin’s dominance. The last peak in dominance occurred in the second half of 2019, when Bitcoin’s market share exceeded 70%, only to decline once the Fed began its rate-cutting program.
During previous rate-cut cycles, particularly in the 2019-2021 period, central banks injected liquidity into the global financial system, boosting risk appetite and driving the growth of alternative cryptocurrencies (altcoins), causing a decrease in Bitcoin’s dominance.
This pattern was observed again in the 2022-2023 and 2018 rate hike cycles, further solidifying the relationship between Bitcoin dominance and the Fed’s monetary policy. SwissOne Capital notes, “With the recent start of the U.S. rate cut cycle, if history repeats itself, Bitcoin’s dominance could face limitations in further growth.”
Looking ahead, the prospect of more rate cuts is supported by the CME’s FedWatch tool, which shows that investors expect another 25-basis-point cut by the end of the year.
As reported by Turkish NY Radio, this development raises questions about Bitcoin’s dominance and the potential rise of altcoins in the near future.
