The Impact of Federal Reserve's Interest Rates on Altcoins and Bitcoin Dominance

Introduction

A crypto analyst predicts that the Federal Reserve will maintain higher interest rates for an extended period, which will have consequences for risk-on assets like altcoins. The analyst suggests that the Federal Reserve will only consider cutting interest rates when the S&P 500 experiences a significant corrective move.

The Relationship Between Risk and Liquidity

According to the analyst, liquidity is currently flowing from high-risk assets to low-risk assets. This does not mean that lower-risk assets cannot drop in value, but when they do, it often signals the end of the cycle because that's when the Federal Reserve takes notice. The analyst highlights that the Federal Reserve did not pay much attention to the S&P 500 when it was at 4,600, but they will start to care if it drops to 3,500 or 3,400.

Impact on Altcoins

As long as the stock market remains elevated, the analyst believes that Bitcoin's dominance (BTC.D) chart, which measures the percentage of the total market cap belonging to Bitcoin, will continue to rise. This will cause many altcoins to lag behind Bitcoin. The analyst also notes that historically, Bitcoin's dominance tends to reverse its uptrend when the Federal Reserve begins cutting interest rates. Until then, the analyst expects crypto investors to shift their capital from altcoins to Bitcoin.

Conclusion

The analyst advises keeping an eye on the S&P 500 as an indicator of when altcoins may turn around against Bitcoin. As long as the stock market remains strong, the Federal Reserve is unlikely to cut interest rates, which will impact altcoins. Investors should consider these factors when making investment decisions in the crypto market.