Against the backdrop of a U.S. Securities and Exchange Commission that has been dropping bombshells across the cryptocurrency industry through lawsuits with Binance (BNB-USD) and Coinbase (COIN), the altcoin market has dealt with a substantial amount of selling pressure in June. Much of that pressure is a reaction to SEC allegations that several significant cryptocurrencies are unregistered securities.
Bitcoin’s Dominance is Growing
In the SEC’s complaints against Binance and Coinbase, the agency added language stating that major altcoins such as Cardano (ADA-USD), Solana (SOL-USD), and Polygon (MATIC-USD) are unregistered securities. Since those designations, the performance of those coins has been abysmal, with some of them declining by as much as 20% in just a 15-minute period in morning trading on June 10th according to a table developed with data by YCharts.
With the SEC wielding its sword in the altcoin market, Bitcoin’s (USD-BTC) dominance is at a 48% two-year high. A chart shows by CoinMarketCap, Bitcoin’s dominance versus the entire crypto market and includes major stablecoins such as Atar (USDT-USD) and USD Coin (USDC-USD)
On its own, Bitcoin’s resilience against other currencies in the crypto market this year is noteworthy. It has become even more impressive when we look at Bitcoin’s dominance against other proof-of-work coins in the market such as Litecoin (LTC-USD), Bitcoin Cash (BCH-USD), and ZCash (ZEC-USD).
Bitcoin has shown a 95.7% dominance figure, which is also a 2-year proof-of-work and not far off a 96.4% six-year high from February 2017. At that time, the BTC price was closer to $1,000 per coin.
SEC Chairman Gary Gensler has hinted in the past that BTC is the only coin in the crypto market that is not an unregistered security. To be clear, dominance doesn’t mean BTC’s price can’t go down. But there are potential macro catalysts that could push BTC higher even as other currencies move lower given the regulatory environment.
Fed Pivot?
There has been a lot of anticipation for the Fed’s June rate hike decision, both from crypto market participants and the broader financial markets. Following the release of May CPI on June 13th, the probability of “no change” target rate at the June 14th Fed meeting jumped to over 94%:
With the prospect of no hikes, equity markets have been rallying for most of June. As of the article’s filing that month to date, rallies in both the S&P and NASDAQ are approaching 5%. Given Bitcoin’s previous correlation with the stock markets, it might be predictable to see the same price movement in BTC. However, since mid-May, Bitcoin has been more correlated with gold and negatively correlated with stocks:
BTC Correlations
From June 12th, BTC’s 30-day correlation with NASDAQ is minus 69, while the correlation with the metal is 7. Although it should be noted that the last time the correlation with stocks was this negative, there was a dramatic reversal a month later. If history repeats itself, this could be an indication that BTC is poised to recover or that the stock could reverse soon.
We don’t know whether the interruption of rate hikes in June would be the end of this hiking cycle. But if one considers it to be the end of the process and looks to 2019 as a comparison, Bitcoin may have already bottomed or may not be too far away.
Fund Flows
CoinShares publishes a weekly report tracking fund flows in many major digital asset investment products globally. These products include funds from Grayscale, ProShares, and many others. As of the June 12 report, CoinShares notes 8 consecutive weeks of crypto fund outflows for a whole of $417 million.
Looking at flows from a year-to-date standpoint, the largest contributor to outflows globally has been Canada at -$286 million. However, in the report, CoinShares stated that the firm believes the outflows are related to monetary policy and are indicative of investor caution regarding the rising cycle. If that’s true, the digital asset fund outflow
By Marina Meza
