Bitcoin Dominance Nears 3-Year High Amid Altcoin Weakness; Aptos Outperforms as SUI Drops

• Bitcoin held above $60,000 support level, while many altcoins tumbled.
• The U.S. dollar surged to its strongest level since mid-August amid strong economic data, geopolitical turmoil, weighing on risk assets.
• Spike in a key interbank borrowing rate may signal U.S. dollar liquidity stress, a Steno Research analyst noted.

Bitcoin BTC$94,418.63 once again was teetering above the $60,000 level on Thursday, while smaller cryptocurrencies tumbled amid geopolitical turmoil and the surging U.S. dollar.

BTC rebounded to $61,500 during the Asian trading hours from Wednesday's very brief dip below $60,000, but turned lower during the European and U.S. sessions. The largest cryptocurrency changed hands around $60,700 recently, up 1% over the past 24 hours.

Meanwhile, the broad-market benchmark CoinDesk 20 Index fell 1.5% during the same period, indicating the weakness in the rest of the digital asset market relative to BTC. Ethereum’s ether ETH$1,785.45 was down 1%, while Ripple's XRP XRP$2.20, Solana SOL$154.14, Avalanche AVAX$22.32 and Render RNDR$4.56 led losses among altcoin majors.

One notable outperformer was layer-1 blockchain Aptos' APT$5.57 native token gaining 7% for the day. Wednesday news of Franklin Templeton expanding its tokenized money market fund to that blockchain may explain that outperformance, while some observers speculated that traders rotated some profits from close competitor network Sui's SUI$3.61 110% rally in a month.

Bitcoin's outperformance over the broader market meant that BTC's market share of the total crypto market capitalization – also known as Bitcoin Dominance – climbed above 58%, while the ETH-to-BTC ratio dropped near its mid-September trough of 0.038.

"Bitcoin dominance continues to trend higher, and it is now just 0.2% away from a new three-year high,” said James Van Straten, a senior analyst at CoinDesk.

U.S. dollar surging

The overall dismal week for crypto happened with increasing concerns about military escalation in the Middle East, which sent crude oil prices near $74 a barrel, the highest in more than a month, while the U.S. dollar hit its strongest level against key currencies since mid-August.

Read more: Bitcoin Not a Safe Haven From Geopolitical Risks, But Still Buy the Dip: Standard Chartered

Thursday's stronger-than-expected ISM non-manufacturing data also supported dollar strength, which usually weighs on prices for risk assets like cryptocurrencies.

"We saw more solid services data from the U.S., which pushed the U.S. dollar index (DXY) closer to 102, giving a 70% likelihood of a 25-basis-point rate cut at the November meeting," Van Straten said.

What may have exacerbated dollar strength and the general risk-off move on asset markets in early October is a spike in Secured Overnight Financing Rate (SOFR), a key borrowing interest rate between banks that could be a signal of liquidity stress, Steno Research's Samuel Shiffman noted in a report.

The report added that the situation is reminiscent – albeit on a smaller scale – of the repo crisis in September 2019, when the Federal Reserve was forced to intervene to end dysfunction in key lending markets.

"We are nearing levels where liquidity pain becomes acute," Shiffman said, adding that the Fed "could feel tempted to address it" by adding liquidity to the financial system.

Another important catalyst for markets will be Friday's U.S. jobs report. "A combination of expected rate cuts and labor strength could boost risk assets," crypto hedge fund QCP Capital said.