Bitcoin Dominance May Keep Climbing Despite Hitting 60% Target, Analyst Suggests

Crypto analyst Benjamin Cowen suggests that Bitcoin BTC/USD dominance might continue climbing, even as it hits his long-standing 60% target

Cryptocurrency analyst Benjamin Cowen is keeping a close eye on Bitcoin (CRYPTO: BTC) dominance as the Federal Reserve continues to cut interest rates.

Here's what Cowen had to say about the matter in his recent YouTube video.

What Happened: Following the Fed's decision to lower interest rates by 25 basis points, Cowen took to his channel to analyze the potential impact on Bitcoin and the broader crypto market.

In his analysis, Cowen highlighted that Bitcoin's dominance has typically peaked — at around 60% — only after quantitative easing starts. However, given the Fed's decision to continue reducing its holdings in Treasury securities and mortgage-backed securities, Cowen sees two possible scenarios playing out.

One possibility is that Bitcoin's dominance will begin a topping process as the Fed continues to reduce its balance sheet. Another scenario suggests that Bitcoin's dominance might overshoot its peak before settling back.

"This is something that I'm keeping a very, very close eye on. We might see a scenario where Bitcoin continues to rally and it sucks the air out of the room and it continues to drive up its dominance," Cowen said.

The crypto analyst also emphasized monitoring Ethereum's (CRYPTO: ETH) performance against Bitcoin, as it plays a key role in dominance trends. He also recommended dollar-cost averaging in altcoins as the market heads into the post-halving phase.

"If you're looking at the longer-term time frame, I would say that the safer bet is to dollar-cost average into altcoins over the next six to eight months."

Cowen also highlighted a section of the Federal Reserve’s press release, which states that the committee plans to "continue reducing its Holdings of Treasury Securities and agency debt and agency mortgage-backed Securities."

"They're not saying that they're going to start QE. They're saying that they're going to continue reducing their holdings. This is very, very important for the crypto market."

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Benzinga's Take on Cowen's Analysis: Cowen's analysis aligns with the broader narrative in the crypto community, which anticipates a bullish period for Bitcoin and other cryptocurrencies following the Fed's decision to lower interest rates.

However, as Cowen himself notes, these patterns could be disrupted by a broader market correction, which would impact both Bitcoin and altcoins.

The Fed's decision to lower interest rates comes at a time when the central bank is also engaged in a strategy of quantitative tightening, gradually reducing its holdings of Treasury securities and mortgage-backed securities.

This strategy contrasts with the quantitative easing measures undertaken by the Fed during the COVID-19 pandemic, which involved large-scale purchases of these securities to stimulate the economy.

Now, the Fed is gradually unwinding these holdings to curb inflation and return to a more neutral monetary stance.

While the Fed's actions are primarily intended to influence the traditional financial markets, they also tend to impact the crypto market, given the interconnectedness of financial assets in the digital age.