Bitcoin dominance continues to grow as a result of the US banking crisis

Some analysts believe that the continued growth of Bitcoin’s dominance during the US banking crisis could mean a change in investors’ attitudes towards this asset and its position in relation to the entire digital currency market.

According to CoinDesk, Bitcoin’s dominance, which measures the cryptocurrency’s share of the entire cryptocurrency market, has increased sharply since the start of instability in the US banking sector almost two months ago.

Market data shows that Bitcoin’s dominance has risen from 42% in early March to a 22-month high of over 48.5%. This growth shows the better performance of this digital currency compared to the whole market.

In the same period of time, the value of the exchange-traded fund SPDR S&P 500 (SPDR S&P 500), which shows the performance of an index of US state banks, has decreased by about 35%.

In March, 3 Silicon Valley banks, Silvergate and Signature Bank, went bankrupt in the United States, raising fears of a full-scale banking crisis in the country. First Republic Bank became the last victim of this banking crisis. The 60% fall in the value of shares of Pacwest Bancorp (PACW) at the end of Wednesday (May 13) also made the situation more complicated than before.

Still, Federal Reserve Chairman Jerome Powell noted at a news conference after the Federal Open Market Committee meeting that the US banking system is healthy and has plenty of resilience.

According to Lewis Harland, investment manager of Dicentral Park Capital, the increasing dominance of Bitcoin on the market due to the instability of the banking sector and the decline in the value of bank shares is a reason for the intensification of the attractiveness of this digital currency as an anti-dollar asset or its purchase due to the weakening of the dollar. ; Just like gold and oil.

Harland added:

We see Bitcoin performing better in the digital currency market when the share value of state banks falls. As the banking crisis unfolds, this highlights Bitcoin’s role as an anti-dollar asset with high liquidity among investors.

Market expectations for further liquidity reduction by the Federal Reserve have increased amid the banking crisis, indicating further weakening of the dollar in the future. On Wednesday, the Federal Reserve increased the interest rate by 0.25 percentage points and announced the possibility of stopping this increase in June.

Bitcoin’s dominance is now trying to break through its multi-year resistance. Harland believes that breaking through this resistance level will be a continuation of Bitcoin’s good performance. He noted:

Bitcoin Dominance is looking to break its 3-year oscillator pattern. A 50% breakout would probably mean a new long-term system in the market, with Bitcoin outperforming.

According to available data, after the fall of Silicon Valley Bank on March 10 (March 19), the price of Bitcoin has increased by about 48% and has reached the range of $29,100.

According to some observers, the impact of the collapse of Silicon Valley Bank on the price of Bitcoin is similar to the Cyprus financial crisis in 2012-2013 (2012-2014). By highlighting the small problems of central banks, the event drew investors’ attention to Bitcoin as a decentralized asset and a hedge against the risks of centralized banking.