Bitcoin’s dominance rate, which measures the cryptocurrency’s share in the overall market, has increased sharply since the onset of the U.S. banking sector instability almost two months ago. Data from TradingView shows that since early March, the dominance rate has risen from 42% to 22-month highs near 49%, indicating the top cryptocurrency’s outperformance relative to the broader market. In contrast, the SPDR S&P regional banking ETF, which seeks to replicate the performance of an index derived from the regional U.S. banks, has fallen by 35% over the same period.
The banking sector instability began in March when three U.S. banks – Silicon Valley Bank, Signature Bank, and Silvergate Bank – failed, triggering fears of a full-blown banking crisis. First Republic Bank became the latest victim of the banking crisis, and shares in Los Angeles-based lender PacWest Bancorp plummeted over 60% on Wednesday. However, Federal Reserve Chairman Jerome Powell has stated that 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 an anti-U.S. dollar play or bet on the dollar weakness, just like gold and oil. Harland suggests that BTC is the high-quality anti-dollar liquid play for investors as the crisis unfolds further.
Expectations for renewed liquidity easing by the Federal Reserve (Fed) have strengthened amid the banking crisis, signaling a weakness in the dollar ahead. On Wednesday, the Fed raised interest rates by 25 basis points and opened the doors for a potential pause in June. BTC’s dominance rate is now probing the upper end of the multi-year range, and a breakout would mean continued BTC outperformance.
Bitcoin picked up after regulators Silicon Valley Bank of March 10 and has rallied 48% to $29,100 since then, according to CoinDesk data. This run higher is reminiscent of the positive performance during the 2013 Cyprus banking crisis.