By Matteo Greco, Research Analyst at the publicly listed digital asset and fintech investment business Fineqia International
Last week, Bitcoin (BTC) closed at around $35,000, up by 1.4% compared to the previous week’s closing value of $34,500. The week demonstrated a steady price action, with BTC fluctuating between $34,000 and $35,000, peaking close to $36,000 on Thursday, marking its highest price this year.
Following five weeks of continuous growth, BTC dominance decreased by 1.1%, closing the week at 53% compared to the previous 54.1%. BTC dominance measures Bitcoin’s market capitalization against the total digital asset market and is an important indicator of market sentiment.
BTC dominance typically shifts in two key moments of market cycles: after reaching a peak and entering a downtrend, and after reaching a low and commencing a new cycle. The recent shift indicates new investors entering the market, as it follows a long period of market downtrend.
The rise in BTC dominance over the past few weeks resulted from investors exiting various altcoin positions and shifting their focus to BTC, awaiting the chance to redirect these funds into emerging altcoins for the upcoming cycle. The decline in dominance after five consecutive weeks of increase marks the first signs of heightened investor interest in altcoins, suggesting a riskier market stance.
This trend is evident in the Total3 metric, representing the total digital asset market cap excluding Bitcoin and Ethereum, which currently stands at around $383.7 billion, the highest level since mid-April 2023. This shows an increased investor focus on riskier, less liquid assets, common in periods of restored market confidence.
On the macroeconomic front, the Federal Reserve (FED) maintained the same interest rates for the second consecutive time after the recent FOMC meeting, suggesting a less aggressive monetary tightening. Market participants do not anticipate further rate increases, with expectations of a first 25bps cut during Q2 in 2024. This indicates positive momentum for the financial markets as it signals the Fed might have reached the peak in interest rates, refraining from further reducing market liquidity compared to current levels.
The focus remains on BTC Spot ETF filings, with the impending final decision on the 21Shares filing by the SEC and other mirrored filings, expected in just a couple of months. The deadline for the decision on the 21Shares application is set for January 10, 2024, with expectations that the SEC will either accept or reject all applications due to their similarity, without granting a first-mover advantage to any issuer.
A SEC approval would likely attract substantial investments from traditional finance, inviting high-net-worth investors and further solidifying digital assets as a widely accepted asset class. Conversely, a rejection would likely yield a short-term negative impact, given the existing investor confidence that an approval is on the horizon, partly factored into current market sentiment.
