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April 15, 2024

Altcoins Shaken as Bitcoin Dominance Surges to 3-Year Highs and Gold Surges to All-Time Highs

April 15, 2024

Gold has surged to unprecedented highs while risk assets face challenges, causing unease and unanswered questions in the global markets.

Meanwhile, Hong Kong is poised to approve spot Bitcoin and Ether ETFs, following the US trend. 

Elsewhere, Bitcoin’s dominance in the crypto market hit a three-year high impacting altcoins amidst heightened volatility, and an unexpected inflation surge has cast doubt on the Federal Reserve’s rate strategy, prompting a shift in market sentiment.

With volatility increasing in the markets, it’s an important time to keep our finger on the pulse.

Gold continues record surge while Bitcoin retraces as risk-on assets suffer

The price of gold soared to new all-time highs this week, while Bitcoin failed to mirror its momentum, causing unease in the crypto markets. 

As the week drew to a close, Bitcoin’s price struggled to rally, hovering around $69,000, before falling to a weekly low of $61,000 during weekend trading.

In comparison, gold emerged as the star performer of the last 7 days, reaching an unprecedented high of $2,431 per ounce on Friday.

Comparison between BTCUSD and XAUUSD over the last 7 days
Comparison between BTCUSD and XAUUSD over the last 7 days

This marks a 30% increase over the last 6 months, which is one of the best 6-month performances in the precious metal’s history.

However, the remarkable rally in gold prices has started to raise eyebrows among market participants, with some questioning the unusual behavior in the face of a favorable macroeconomic landscape.

In particular, analysts from The Kobeissi Letter, pointed to historical indicators such as a high US dollar and the appetite for risk-on assets soaring.

While central bank acquisitions and escalating geopolitical tensions in the Middle East could be supporting higher gold prices, the surge in prices has still left many asking the question, “Does someone know something?”  

The rise of gold is often seen as a positive indicator for Bitcoin, which is increasingly seen as digital gold, performing many of the key functions of gold to a higher standard.

Hong Kong to follow the US and approve Bitcoin Spot ETFs?

According to Bloomberg, Hong Kong is on the verge of greenlighting spot Bitcoin and Ether exchange-traded funds, mirroring the trend we have already witnessed in the United States. 

Sources close to the matter suggest that regulatory approval could come as early as today, potentially paving the way for trading by the end of the April.

Tweet from CoinDesk announcing the potentially imminent approval of Bitcoin and Ether ETFs in Hong Kong
Tweet from CoinDesk announcing the potentially imminent approval of Bitcoin and Ether ETFs in Hong Kong

While the approval timeline remains flexible and subject to potential last-minute alterations, anticipation is high within the cryptocurrency sphere. 

Harvest Global Investments, a prominent asset-management firm based in China, purportedly leads the charge, having spearheaded the application process for a spot bitcoin ETF. 

Additionally, a collaborative effort between Bosera Asset Management (International) Co. and HashKey Capital is also vying for approval, positioning themselves as frontrunners in the emerging ETF landscape.

Should all listing particulars be swiftly negotiated with the Hong Kong Exchanges & Clearing (HKEX), investors could witness the debut of these innovative financial products within weeks. 

In contrast to the United States, where spot bitcoin ETFs were sanctioned earlier this year, Hong Kong’s prospective approval includes both Bitcoin and Ether ETFs. 

The impending approval of these ETFs has piqued investor interest because alongside a regulatory formality; it represents a potential catalyst for substantial market movements. 

Expectations are running high for a surge in market activity akin to the record-breaking rally witnessed following the approval of spot Bitcoin ETFs in the United States earlier this year.

Bitcoin dominance surges to 3-year high amidst altcoin pressure

Bitcoin has asserted its dominance in the cryptocurrency market, reaching a milestone not seen in three years. 

The surge in Bitcoin’s dominance comes amidst a period of heightened volatility, with altcoins experiencing substantial downward pressure.

According to data from TradingView, Bitcoin’s dominance in the total crypto market cap soared to 56.3% on April 12. 

While Bitcoin faced its own challenges, with price fluctuations pushing BTC below $62,000, the impact on altcoins was even more severe. 

Many of the top twenty cryptocurrencies witnessed declines exceeding 15% on Friday, exacerbating the shift in market share towards Bitcoin.

Popular trader and social media commentator Bagsy remarked on the impressive nature of Bitcoin’s dominance chart, particularly considering the continuous influx of new altcoins into the market.

Despite the current dominance of Bitcoin, some analysts remain optimistic about the prospects for altcoins. 

Historically, Bitcoin bull markets have been followed by periods of increased dominance, often paving the way for altcoin rallies during extended periods of Bitcoin consolidation.

Drawing parallels with previous altcoin seasons, some analysts, such as @MikyBullCrypto, believe that the current market dynamics could be a precursor to a significant uptrend in altcoin dominance, coupled with a decline in Bitcoin’s dominance.

Comparison between the total market cap of all altcoins and Bitcoin’s dominance chart
Comparison between the total market cap of all altcoins and Bitcoin’s dominance chart

US CPI surges casting doubt on Fed’s rate strategy

An unexpected surge in inflation, as indicated by the CPI print, has fueled uncertainty among investors regarding the Federal Reserve’s future course of action on interest rates.

Market sentiment swiftly shifted as the March CPI data surpassed expectations, reporting a 0.4% month-on-month increase and a 3.5% year-over-year rise, exceeding estimates provided by Dow Jones economists. 

The core CPI, which excludes volatile food and energy prices, climbed 0.4% from February, signaling a broader inflationary trend with a 3.8% year-over-year increase.

A notable surge in the housing and gasoline sectors contributed to over half of the overall increase in the CPI index for March, as outlined in the official press release from the U.S. Bureau of Labor Statistics.

The release of the CPI data sparked immediate speculation within market circles regarding the Federal Reserve’s stance on interest rates in the upcoming months. 

Traders swiftly adjusted their expectations, with odds of a June rate cut plummeting to 20.6% according to the CME’s FedWatch tool, down from a previous estimation of 60%.

Target rate probabilities for Fed Funds Rate in June 2024
Target rate probabilities for Fed Funds Rate in June 2024

Analysts now predict that the Fed will likely maintain interest rates at their current levels throughout May and June, with the possibility of the first rate cut being pushed back to September. 

This shift in market sentiment marks a significant departure from historical trends, with interest rate futures now pricing in just two rate cuts for the entirety of 2024, contrasting sharply with previous guidance from the Federal Reserve.

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