First Mover Americas: BTC Dominance Reaches 7-Month Highs, Alts Suffer

The latest moves in crypto markets in context for May 26, 2022.

AccessTimeIconMay 26, 2022 at 1:29 p.m. UTC
Updated May 26, 2022 at 2:53 p.m. UTC

Lyllah Ledesma is a CoinDesk Markets reporter currently based in Europe. She holds bitcoin, ether and small amounts of other crypto assets.

Shaurya is an analyst/editor for CoinDesk's markets team in Asia.

Good morning, and welcome to First Mover. I’m Lyllah Ledesma, here to take you through the latest in crypto markets, news and insights.

  • Price Point: Altcoins took a hit in price this morning, with ether dropping more than $100 in an hour.
  • Market Moves: Bitcoin dominance over altcoins reached a seven-month high. The last time it reached this level was in October 2021.
  • Feature: We take a look at data showing how USD coin (USDC) has become the stablecoin of choice on the Ethereum blockchain, not the larger tether (USDT).

Price Point

Bitcoin (BTC) was down 1.7% over the last 24 hours and is struggling to hold $30,000. At press time, the world’s largest cryptocurrency by market capitalization was trading around $29,000.

Ethereum (ETH) took a bigger hit and was trading down 6.5% on the day, around $1,800.

“With BTC’s price not catching a bid to the upside the negativity comes out,” said Charles Storry, head of growth at Phuture, a crypto index platform.

“The narrative around BTC and crypto, in general, goes from a futuristic store of value to a scam,” said Storry. "This brings down the price till investor sentiment changes and we move back to the upside."

Altcoins appear to be suffering more than BTC, with Avalanche (AVAX) leading the drop in price. AVAX was down 12% on the day, Cosmos’ ATOM down by 10.5% and Solana’s SOL by 8%.

In traditional markets, Wall Street had a positive trading session overnight, but has since been mixed. Bonds gained ground as traders weighed the Fed’s minutes that were less hawkish than expected. News from China overnight sent Asian markets and European futures lower.

Market Moves

Despite BTC’s market capitalization declining to $552 billion, bitcoin dominance over altcoins is at a seven-month high. BTC dominance – the measure of how much of the total market cap of crypto is comprised of bitcoin – has increased to 45%, the highest the metric has gone up to since October 2021.

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Bitcoin Dominance Chart, 1D (TradingView)

However, signals for BTC are still not showing signs of recovery, according to Laurent Kssis, head of Europe at Hashdex.

“We may see further downward trends in altcoins as there are still strong signs BTC is to remain below $30,000,” said Kssis, in an interview with CoinDesk.

Kssis noted that ether’s drop in price Thursday was particularly significant (ether dropped by $100 at around 9:00 UTC).

"We saw large sellers dominating the market in ether this morning which was fueled by losing interest. This is a clear absence of a bullish volatility currently witnessed in the crypto market,” said Kssis.

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There has been a change in the thinking of the large crypto investors known as whales. Data shows USD coin (USDC) has become the stablecoin of choice on the Ethereum blockchain, not the larger tether (USDT).

In crypto, whales are the biggest cryptocurrency holders – institutional investors, exchanges, deep-pocketed individuals – who are capable of moving large amounts of tokens and swaying market prices. Analysts closely watch their activity to spot trends and anticipate large price movements.

Data from CoinMetrics, a blockchain analysis firm, shows wallet addresses on the Ethereum blockchain that hold more than $1 million USDC surpassed the number of wallets that hold USDT, still the largest stablecoin by market cap.

“In the current market condition, a lot of people view USDC as the safer, preferred stablecoin," Edward Moya, trading platform Oanda’s senior market analyst, told CoinDesk.

USDC, the second-largest stablecoin, has been gaining market share since the once-$18 billion UST stablecoin collapsed, and USDT’s peg to the dollar wobbled.

CoinMetrics looked at blockchain data since May 9, when UST lost its peg to the U.S. dollar. The firm identified 147 Ethereum wallet addresses that increased their USDC balance by at least $1 million while decreasing their USDT balance by at least $1 million. Among them, there were 23 that added at least $10 million USDC and disposed of $10 million USDT. Many of these addresses are exchanges, custodial services or decentralized finance (DeFi) protocols, the report added.

The report also said USDC’s advantage over Tether's USDT in so-called free float supply – the number of tokens that investors hold – on the Ethereum blockchain hit an all-time high on Tuesday among all holder groups.

"This likely reflects the fact that only large holders are generally privileged to redeem USDT and mint new USDC to capture an arbitrage," Kyle Waters, analyst at CoinMetrics, wrote in the report. "But it might also be the case that some large accounts are de-risking their holdings, turning to the perceived assurances of USDC’s monthly attestations and full-reserve backing."

Today’s newsletter was edited by Lyllah Ledesma and produced by Parikshit Mishra and Stephen Alpher.

CORRECTION: The emailed newsletter incorrectly said ether dropped by $1,000. The price decline was $100.

DISCLOSURE

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Lyllah Ledesma is a CoinDesk Markets reporter currently based in Europe. She holds bitcoin, ether and small amounts of other crypto assets.

CoinDesk - Unknown

Shaurya is an analyst/editor for CoinDesk's markets team in Asia.

CoinDesk - Unknown

Lyllah Ledesma is a CoinDesk Markets reporter currently based in Europe. She holds bitcoin, ether and small amounts of other crypto assets.

CoinDesk - Unknown

Shaurya is an analyst/editor for CoinDesk's markets team in Asia.

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