In a recent tweet from Benjamin Cowen, a prominent crypto analyst, he shared his thoughts on the future of altcoin and Bitcoin (BTC) pairs.
Cowen predicts that altcoins will continue to “bleed” in value relative to Bitcoin, especially as BTC’s dominance increases. This pattern, according to Cowen, is similar to what happened last year when the U.S. Federal Reserve (the Fed) announced it would slow down its Quantitative Tightening (QT) efforts.
Understanding Bitcoin’s Dominance Over Altcoins
Bitcoin’s dominance, which is the proportion of the total cryptocurrency market capitalization that Bitcoin accounts for, has been a key indicator in market trends. Cowen points out that when the Fed slowed its QT policies, it was followed by a drop in altcoins’ performance relative to Bitcoin. This trend of altcoins underperforming while Bitcoin rises in dominance is something Cowen anticipates will continue.
The chart accompanying the tweet shows Bitcoin’s dominance and the corresponding behavior of altcoin pairs. Key points are marked to highlight when the Fed made announcements regarding QT, and the market response is clear: as the Fed adjusted its policies, altcoins saw a significant bleed in value against Bitcoin.
The Pattern of BTC Dominance
Looking at the historical data shown in the chart, Bitcoin dominance fluctuates with changes in monetary policies like QT. Cowen believes that the slowing of QT in 2025 will continue to cause altcoins to underperform compared to Bitcoin. This could also lead to an increase in Bitcoin’s dominance to 66%, as more capital flows into BTC as the Fed’s actions impact market liquidity.
The visual representation of BTC dominance on the chart shows how Bitcoin has gained a larger market share during periods when QT has been slowed or paused. This dominance trend could potentially continue into 2025, further reinforcing Bitcoin’s leadership in the crypto space.
What is Quantitative Tightening (QT)?
Quantitative Tightening (QT) is the opposite of Quantitative Easing (QE). In simple terms, it’s the process by which a central bank reduces the amount of money circulating in the economy by selling off its assets, such as government bonds. The effect of QT is often a tightening of liquidity in the financial markets. For the cryptocurrency market, this liquidity reduction tends to affect altcoins more than Bitcoin, causing a shift in capital towards Bitcoin, which is perceived as a safer and more stable asset.
Conclusion
Benjamin Cowen’s insights suggest that Bitcoin’s dominance will continue to rise, particularly as altcoins struggle in a tighter liquidity environment caused by the Federal Reserve’s slowing of Quantitative Tightening. For those invested in altcoins, the road ahead might be challenging unless broader market conditions shift. As always, market participants should stay informed and prepared for shifts in both the crypto market and traditional financial policies.
Kosta Gushterov
Reporter at Coindoo
Kosta has been a part of the team since 2021 and has solidified his position with a thirst for knowledge, incredible dedication to his work and a “detective-like” mindset. He not only covers a wide range of trending topics, he also creates reviews, PR articles and educational content. His work has also been referenced by other news outlets.
Source: https://coindoo.com/altcoins-vs-bitcoin-how-quantitative-tightening-qt-impacts-the-market/