Market Cycles and Capital Rotation
Typically, Bitcoin’s dominance wanes near the end of market cycles as capital rotates into altcoins—digital assets other than Bitcoin. However, the current trend suggests a reversal, with investors favoring Bitcoin over altcoins.
Impact of Interest Rates on Cryptocurrency Markets
In January, the U.S. Federal Reserve opted to hold interest rates steady instead of initiating another round of cuts, citing healthy U.S. jobs data. This hawkish stance negatively affected both stocks and cryptocurrencies. Bitcoin’s spot price has dropped approximately 20% since the central bank’s January 29 announcement, trading at roughly $82,750 as of March 12. It had previously reached an all-time high of over $109,000 in December.
Altcoins’ Sensitivity to Macroeconomic Factors
Altcoins are even more sensitive to macroeconomic volatility than Bitcoin. Savvy traders have rotated out of altcoins and into Bitcoin, which, despite its own decline, has significantly outperformed the broader crypto market.
Inflation Trends and Future Outlook
The February Consumer Price Index (CPI), a measure of U.S. inflation, came in lower than expected at around 2.8% on March 12. This marks the first decline in both Headline and Core CPI since July 2024, indicating that inflation is cooling down in the U.S.
Federal Reserve’s Upcoming Decisions
Data from the CME Group, a U.S. derivatives exchange, indicates that markets overwhelmingly expect the Federal Reserve to hold rates steady at its next meeting in March. The future trajectory of Bitcoin’s rally largely depends on whether the Fed opts to hike interest rates to stave off inflation.
