Bitcoin is shining, but here’s why altcoins failed to catch on amid the banking crisis

The recent banking crisis in the US and Europe has sparked a strong rally in Bitcoin, but other cryptoassets have not been able to translate this action into their prices. A majority of altcoins have underperformed the largest crypto asset in the short-term price rally. Over the past two weeks, Bitcoin’s price has jumped more than 40 percent to $28,250 on Wednesday, March 22, 2023. The largest crypto asset was trading at around $19,950 on March 10, 2023. But other major tokens including Ethereum, BNB, Cardano, XRP has failed to perform on a similar line. Analysts said bitcoin is always seen as a store of value, and amid the banking crisis in some of the world’s strongest economies and gloomy macroeconomic sentiment, its safe-haven appeal has grown and investors are lapping up the digital symbol. Edul Patel, co-founder and CEO of Mudrex said factors such as banking sector instability, high inflation data and reduced confidence in a dovish Federal Reserve have pushed demand for Bitcoin, which is trading near nine-month highs. “Bitcoin can act as a hedge against inflation and a bet against a devaluing US dollar, and investors prefer it to altcoins. Investors’ confidence in Bitcoin as a safe store of value is reflected in its increasing value, rather than a general sentiment against cryptocurrencies that rely heavily on on their basic ecosystem,” he said. The dominance of Bitcoin in the overall crypto market has increased to more than 46 percent on Wednesday, according to data from Coinmarketcap. The total market cap of Bitcoin is around $550 billion, while the crypto market has a cumulative market cap of $1.18 trillion. Bitcoin has experienced a significant rise in recent days. However, when looking at the total market capitalization of crypto, it has only increased by 8% to $1.17 trillion. This implies that there is a lack of significant new investment entering the market, the CoinDCX Research Team said. “The uncertainty surrounding stablecoins and illiquid assets in the banking sector has led individuals to move from stablecoins to Bitcoin instead of depositing their money in banks,” it said. “Market direction will be determined by the outcome of the Fed’s FOMC meeting.” Bitcoin is also considered sensitive to changes in the money supply, and as such, many have argued that the increase in the size of the Fed’s balance sheet is the key driver of the rally, said Rajagopal Menon, vice president, WazirX. “Last week, the Fed and its allies effectively bailed out the depositors of SVB. As part of this bailout, the Fed had to increase its balance sheet by $300 billion. The Fed printed $300 billion of new dollars, given that Bitcoin was built in response to the bank bailouts of 2008. BTC’s price went parabolic in response to the SVB rescue,” he added. Analysts said that Bitcoin is the oldest and best-known crypto-asset among investors. Interestingly, not only bitcoin, gold is also gaining momentum, but its counterpart silver is unable to catch up. New investors in the crypto space tend to gravitate towards the more established coins, such as Bitcoin over taking risks on relatively unknown Altcoins. The recent rise in Bitcoin’s price and the attention it has received in the news may also bring in more mainstream investors and institutions, which will make it even more dominant in the market, Menon of WazirX said.

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