(May 18): Bitcoin might be having a tough time of late, but it's holding up much better than other cryptocurrencies, showcasing its ability to stay dominant during rough spells.
The coin's market-cap dominance has risen "sharply" during the latest selloff, reaching 45%, the highest level this year, according to data compiled by Babel Finance. It suggests "altcoins are at their worst," the firm's strategists wrote in a note.
Even last week, as prices plunged amid the TerraUSD implosion, crypto fans added US$299 million to products focused on Bitcoin, with market-watchers suggesting that investors have been flocking to it as a better bet.
"Bitcoin is the best-known and most-liquid cryptocurrency, so it is seen as the safest one," said Matt Maley, chief market strategist at Miller Tabak + Co. "With massive drops of some members of this asset class in the past week, it's no surprise that those who think it's a good buying opportunity are focusing on the safest one."
It's an idea that emerges whenever cryptocurrencies suffer through challenging times. Bitcoin is the oldest digital asset and has name recognition. It also has a devoted group of fans, who often refer to themselves as Bitcoin maximalists, betting the coin is the currency of the future.
That's not to say it's seeing stellar returns. Like the rest of the market, it's mired in a bear market, but is just holding up much better than altcoins are. Bitcoin has lost 26% over the past two weeks, while Ether has shed more than 32%.
Other coins have fared even worse, with Solana falling 42% and Avalanche dropping more than 50%. As of 9.51am in New York on
"Altcoin investors also became fearful of the developments in the market," said Oleksandr Lutskevych, founder and CEO of CEX.IO, citing aggressive moves by the Federal Reserve.
Cryptocurrencies are in the gutter this year. Most central banks have done away with loose monetary policy and are hiking interest rates to cool down inflation. It's created an unpleasant environment for all manner of risk assets, including US equities.
"Markets have become convinced that rate hikes will continue for the foreseeable future," said Lutskevych. "This has expedited exits from riskier assets such as stocks and cryptocurrencies."
When the selloff will abate is anyone's guess. Lori Calvasina at RBC Capital Markets says she's been monitoring the crypto-stocks correlation. Bitcoin has, in the past, been a leading indicator for when the market might bottom, though it's less so such a predictor now.
"It was really giving us a sign at the peak. It's not really telling us too much now, but there, of course, has been severe declines there," she told Bloomberg Television. "I will tell you, equities don't tend to go down as much as crypto, so it does end up being sort of a safer asset."
Babel strategists, meanwhile, are looking at a bullish development: Bitcoin is getting closer to its realized on-chain price of around US$24,000. That gauge attempts to measure if an asset is over or undervalued relative to its fair value. "A green area generally signals a buying opportunity and the market continues to move in that direction," they wrote.
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