Bitcoin was roughly flat over the past 24 hours while trading activity in alternative coins increased.
Bitcoin traded around the $41,000 on Wednesday as some traders appeared to be in no rush to pick a price bottom. Analysts see the potential for a short-term price bounce, especially as technical indicators have remained in oversold territory for about a month.
"Investors and traders appear to be digesting the macro possibilities within this new inflationary regime markets have entered, alongside an increasingly hawkish Federal Reserve," Will Hamilton, head of trading and research at Trovio Capital Management, wrote in an email to CoinDesk.
On Tuesday, Morgan Stanley stated that the imminent start of central bank tightening is putting pressure on the crypto market. Bitcoin’s market capitalization has tracked the growth of global money supply, which peaked in February 2021 (two months before a 50% drop in BTC's price), according to Morgan Stanley.
For now, some traders are still finding relative value in some alternative cryptocurrencies. Relative value is a method of determining an asset's worth that takes into account the value of similar assets.
"Lower demand for bitcoin has been driven by market participants shifting focus towards outperforming mid-cap assets, including Fantom and FTT, which have returned 31% and 15% respectively during the past week," Hamilton stated, referring to the Fantom smart contract platform and the FTT token associated with crypto exchange FTX.
Latest prices
●Bitcoin (BTC): $41703, −0.19%
●Ether (ETH): $3120, −0.15%
●S&P 500 daily close: $4533, −0.97%
●Gold: $1844 per troy ounce, +1.72%
●Ten-year Treasury yield daily close: 1.83%
GBTC discount widens
Grayscale Bitcoin Trust (GBTC) shares have widened their discount relative to the underlying cryptocurrency held in the fund, reaching a record of 26.5% on Wednesday.
GBTC has been the preferred venue for institutional investors to gain exposure to crypto without having to purchase bitcoin directly, but the shares have traded at a steep discount over the past year as demand for the product shrank. (Grayscale Investments, which manages the trust, is a unit of Digital Currency Group, which also owns CoinDesk.)
"There's still no way for bitcoin to ever leave GBTC, which means it should continue to trade with a substantial discount to reflect that illiquidity," David Nadig, director of research and chief investment officer at ETFTrends.com, wrote in an email to CoinDesk.
Bitcoin dominance stabilizes
Bitcoin's market capitalization relative to the total crypto market capitalization, or the BTC dominance ratio, is starting to stabilize around 40%. That's the lowest level since 2018, which was when alternative cryptocurrencies (altcoins) experienced greater price declines than BTC. Crypto investors tend to seek relative safety in bitcoin during times of market stress.
For now, it appears that bitcoin's dominance ratio could have further room to drop toward the 2018 low of around 36%. Some analysts expect a continued rotation to alternative cryptocurrencies such as ether and decentralized finance (DeFi) tokens due to their many use-cases compared to bitcoin's appeal as a store of value.
"FTM, LUNA, ATOM and MATIC have exhibited relative strength among the larger market-cap altcoins, with upcoming product updates prevalent in these pairs," FundStrat, a global advisory firm, wrote in a Wednesday newsletter.
Also, a number of Ethereum competitors are starting to gain market share.
"Despite major developments in the bitcoin market, the current market narratives continue to lean towards emerging developments outside Ethereum and Bitcoin, namely Ethereum competitors, scaling solutions and OpenSea alternatives," 21Shares, a crypto investment firm, wrote in a report.
Altcoin roundup
Cardano's ADA token leads crypto majors lower: Earlier on Wednesday, ADA dropped about 10% along with smaller declines in other altcoins such as MATIC and SOL. ADA's decline appears typical of a correction often seen after a notable price rally. The token jumped nearly 60% to $1.64 earlier this month, outperforming bitcoin as the impending launch of SundaeSwap, the first decentralized finance (DeFi) exchange on the Cardano blockchain, revved up investor interest in the cryptocurrency.
Active blockchain games on the rise: The prices of tokens for gaming projects like Axie Infinity have fallen recently, but user metrics in this subsector of cryptocurrencies are soaring. There are now 398 active blockchain games, defined as having at least one active wallet in the past 24 hours within the game, according to the data tracker DappRadar. That's a 92% increase from a year ago. Read more here.
Ethereum vs. Solana: Ethereum’s dominance in non-fungible tokens (NFTs) is shrinking because of congestion and high gas fees, JPMorgan said in an analyst report. The network’s market share of NFTs has dropped to around 80% from about 95% at the start of 2021. JPMorgan cautions that if Ethereum’s loss of NFT market share continues in 2022, it could be a bigger problem for its valuation.
Coindesk
