May 4, 2023

Bitcoin has pushed above $29,000 following the U.S. Federal Reserve’s 25 basis point interest rate hike on Thursday, with some analysts speculating on a strong break to the upside after over a month of trade in a narrow wedge. The move over $29,000 came a few hours after the Fed hike as a report indicated another U.S. bank failure could soon be at hand. Crypto services provider Matrixport has said that if Thursday’s rate rise proves to be the last of this cycle, bitcoin could rally 20% to $36,000. Despite trading volumes declining slightly, the “path higher sees only limited resistance,” Matrixport said in a research note on Thursday. The end of the recent earning season will see stock buybacks restart, which will “continue to be a tailwind for stocks and risk assets,” the note added.

The U.S. Securities and Exchange Commission (SEC) decided not to include a definition of digital assets in its latest hedge fund ruling, in what could have been a sign of positive intent toward clearer regulation of the crypto sector. The SEC had included the definition of assets that “use distributed ledger or blockchain technology,” in its 2022 proposal to overhaul mandatory disclosures for hedge funds, but has now pulled that wording. The agency said it is “continuing to consider this term and [is] not adopting ‘digital assets’ as part of this rule at this time.” Anne-Marie Kelley, a former SEC official and now a partner at Mercury Strategies, suggested the commission may have deleted it as “any recognition of digital assets’ uniqueness weakens their litigation stance that digital assets are securities.”

The WallStreetBets token (WSB), which is linked to the WallStreetBets subreddit, dropped 90% in the last 24 hours following a big run higher that had seen its market cap jump to $50 million in under three days. The plunge came after one of the insiders connected to the project, @zjzWSB, dumped a large amount of tokens in return for 334 ETH ($635,000). Blockchain sleuth @ZachXBT flagged the transactions on Twitter, which seemed to trigger the mass selling, bringing about the 90% crash. Users had previously received an airdrop of nearly seven ether worth of WSB tokens for simply pasting their crypto wallet addresses on Twitter. This helped the tokens go viral on Crypto Twitter, forming part of the ongoing memecoin frenzy, which has also spawned the likes of PEPE.

Bitcoin’s dominance of the cryptocurrency market has risen from 42% to 49% since the U.S. banking sector hit choppy waters in early March. The dominance rate, which measures BTC’s performance relative to the broader market, is now at a 22-month high, according to data tracked by TradingView.

Some analysts have observed that bitcoin’s strong performance in conjunction with the slide in banking stocks is evidence of crypto’s strengthening appeal as a hedge against weakness of the dollar, similar to gold or 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," Decentral Park Capital's Portfolio Manager Lewis Harland told CoinDesk.

Bitcoin dominance has oscillated in a range of 37.5% to its recent high of 48.9% over the last two years. Breaking above 50% would “likely signal a new market regime of prolonged BTC outperformance within the market,” according to Harland.

CoinDesk is coming back to Austin for Consensus 2024. Get your super early bird tickets for the lowest possible rates and join us May 29-June 1, 2024. Get your tickets now.