The Zhitong Finance App learned that Bitcoin's share in the cryptocurrency market is rising to a very high level in 2021. This indicates that as investors prefer the biggest tokens, it also suggests that investors' overall risk appetite for cryptocurrencies is declining, and investors' cautious investment sentiment in smaller digital assets. According to the latest statistics released by CoinGecko, Bitcoin accounts for 48.5% of the $1.1 trillion value of the crypto market, up from 38% in early 2023.
When funds in the market think that investing in cryptocurrencies is becoming more and more risky, some speculators tend to abandon smaller cryptocurrencies and switch to the largest Bitcoin.
One example that best illustrates this trend is Ethereum, which ranked second. The vast majority of cryptocurrencies have dropped sharply so far this quarter. Among them, the price of Ethereum has dropped 6%, while Bitcoin has risen about 2%. An exchange-traded fund (ETF) that invests in Ethereum futures debuted in the US in October last year, but failed to receive a large amount of capital to flow into the ETF, which is a major blow to the idea that global cryptocurrency adoption is bound to expand.
As of press time, the price of Bitcoin has dropped less than 1% to $27,648. The price of Ethereum is near $1,588, a drop of more than 2%. Other major cryptocurrencies have declined by varying degrees.
Caroline Mauron, co-founder of digital asset derivatives liquidity provider Orbit Markets, said that Bitcoin's share and price performance is superior to other cryptocurrencies, proving that it “has long claimed that traditional market investments provide a new safe haven, or at least brought the benefits of diversified asset allocation.”
The cryptocurrency industry is struggling to cope with the prospects of a long-term rise in global borrowing costs. At the same time, it is also a clear reminder that the US government's ongoing trial against the collapse of the FTX exchange empire carried out by Sam Bankman Fried poses a risk to the cryptocurrency industry, and global regulators may further introduce strict regulations to regulate cryptocurrencies.
Even so, some investors are still pinning their hopes on seasonal and technical patterns. Statistics compiled by Bloomberg (Bloomberg) show that over the past decade, Bitcoin's average increase in October was 24%.
As of October 8, the cryptocurrency has climbed for four consecutive weeks. Statistics for the past 10 years show that after a potential rebound like October, Bitcoin is likely to rise by about 16% in the next month.
There is a new consensus that the Fed has maintained high interest rates for a long time, and even Bitcoin's rebound is gradually dissipating
However, as far as current trends and macro-level factors are concerned, the rebound in cryptocurrency assets such as Bitcoin from last year's sharp decline is gradually disappearing. The trend of Bitcoin is closely linked to US technology stocks, but under the suppression of high interest rate expectations, the current rebound momentum of technology stocks is weakening; moreover, the increase in Bitcoin is greater than that of the NASDAQ 100 index, which is the benchmark index for technology stocks, but the decline is also stronger than that of US technology stocks. Since this year, Bitcoin's increase reached a phased peak of 90% during the year in July, but has now fallen to 67%. In April of this year, Ethereum's increase so far this year once reached 77%, but so far it's only 32%, less than half of its peak.
Vetle Lunde, senior analyst at K33 Research, said that currently the appeal of cryptocurrencies is still focused only on Bitcoin. The analyst said that the slow investment progress of Ethereum futures ETFs shows that demand from institutional investors to increase their exposure to Ethereum is very low.
When the Federal Reserve keeps interest rates high for a long time, interest in leveraging cryptocurrency transactions such as Bitcoin (BTC) often exposes the market's inherent risks. In cases involving cryptocurrencies such as Bitcoin and Ethereum, many cryptocurrency holders are forced to liquidate due to rising interest rates, so they can afford debt and the high cost of living under high interest rates and high inflation.
Therefore, there is no doubt that the Fed's decision to maintain high interest rates is closely related to the recent bearish sentiment of cryptocurrencies such as Bitcoin, and the decline in investors' overall risk appetite for cryptocurrencies. Some analysts currently anticipate that as the Fed will maintain high interest rates for a long time, Bitcoin's potential upside will be severely curtailed, and that it may explore a low of $20,000 during a period of high interest rates. Analytical data from Peruvian Bull suggests cryptocurrencies such as Bitcoin may experience wave after wave of selling pressure before the Fed lowers the benchmark interest rate.