Share this article

Bitcoin's Dominance Rate Surges After U.S. Banking Crisis

Bitcoin's outperformance during the banking crisis indicates the cryptocurrency is the anti-dollar liquid play for investors, one portfolio manager said.

Updated Jan 24, 2024, 12:31 a.m. Published May 4, 2023, 8:06 a.m.
jwp-player-placeholder

Bitcoin's (BTC) dominance rate, measuring the cryptocurrency's share in the broader market, has risen sharply since the onset of the ongoing U.S. banking sector instability almost two months ago.

Since early March, the dominance rate has increased from 42% to 22-month highs near 49%, indicating the top cryptocurrency's outperformance relative to the broader market, according to data tracked by the charting platform TradingView.

STORY CONTINUES BELOW
Don't miss another story.Subscribe to the Crypto Daybook Americas Newsletter today. See all newsletters

The SPDR S&P regional banking exchange-traded fund (ETF), which seeks to replicate the performance of an index derived from the regional U.S. banks, has tanked by 35% over the same time frame.

In March, three U.S. banks – Silicon Valley Bank (SVB), Signature Bank (SBNY) and Silvergate Bank (SI) – failed, triggering fears of a full-blown banking crisis. First Republic Bank (FRCB) became the latest victim of the banking crisis. To complicate matters, shares in Los Angeles-based lender PacWest Bancorp (PACW) plummeted over 60% on Wednesday.

Advertisement

However, U.S. Federal Reserve Chairman Jerome Powell said the banking sector is "sound and resilient."

According to Decentral Park Capital's portfolio manager, Lewis Harland, bitcoin's growing market dominance amid the banking sector instability and the slide in banking stocks is evidence of the cryptocurrency's strengthening appeal as anti-U.S. dollar play or bet on the dollar weakness just as gold and oil.

"You see outperformance of BTC within the crypto market when regional bank share prices collapse. This signals that BTC is the high-quality, anti-dollar liquid play for investors as the crisis unfolds further," Harland told CoinDesk.

Expectations for renewed liquidity easing by the Federal Reserve have strengthened amid the banking crisis, signal dollar weakness ahead. On Wednesday, the Fed raised interest rates by 25 basis points and opened the doors for a potential pause in June.

The dominance rate stood at 48.5% at press time, having recently set a high of 48.9%. (Decentral Park Capital)
The dominance rate stood at 48.5% at press time, having recently set a high of 48.9%. (Decentral Park Capital)

BTC's dominance rate is now probing the upper end of the multiyear range. A breakout would mean continued BTC outperformance, according to Harland.

"Bitcoin dominance is looking to break its three-year oscillation pattern," Harland said. "A break of 50% would likely signal a new market regime of prolonged BTC outperformance within the market."

Advertisement

Bitcoin picked up after regulators Silicon Valley Bank of March 10 and has rallied 48% to $29,100 since then, CoinDesk data shows. The run higher is reminiscent of the positive performance during the 2013 Cyprus banking crisis.


More For You

Exchange Review - March 2025

Exchange Review March 2025

CoinDesk Data's monthly Exchange Review captures the key developments within the cryptocurrency exchange market. The report includes analyses that relate to exchange volumes, crypto derivatives trading, market segmentation by fees, fiat trading, and more.

What to know:

Trading activity softened in March as market uncertainty grew amid escalating tariff tensions between the U.S. and global trading partners. Centralized exchanges recorded their lowest combined trading volume since October, declining 6.24% to $6.79tn. This marked the third consecutive monthly decline across both market segments, with spot trading volume falling 14.1% to $1.98tn and derivatives trading slipping 2.56% to $4.81tn.

  • Trading Volumes Decline for Third Consecutive Month: Combined spot and derivatives trading volume on centralized exchanges fell by 6.24% to $6.79tn in March 2025, reaching the lowest level since October. Both spot and derivatives markets recorded their third consecutive monthly decline, falling 14.1% and 2.56% to $1.98tn and $4.81tn respectively.
  • Institutional Crypto Trading Volume on CME Falls 23.5%: In March, total derivatives trading volume on the CME exchange fell by 23.5% to $175bn, the lowest monthly volume since October 2024. CME's market share among derivatives exchanges dropped from 4.63% to 3.64%, suggesting declining institutional interest amid current macroeconomic conditions. 
  • Bybit Spot Market Share Slides in March: Spot trading volume on Bybit fell by 52.1% to $81.1bn in March, coinciding with decreased trading activity following the hack of the exchange's cold wallets in February. Bybit's spot market share dropped from 7.35% to 4.10%, its lowest since July 2023.

More For You

This article is created to test tags being added to image overlays

Consensus 2025: Zak Folkman, Eric Trump

Dek: This article is created to test tags being added to image overlays

What to know:

  • Ethena's USDe becomes fifth stablecoin to surpass $10 billion market cap in just 609 days, while Tether's dominance continues to slip.