- Federal Reserve’s interest rate decisions hinge on the S&P 500’s performance, affecting altcoins, explains crypto analyst Benjamin Cowen.
- Bitcoin’s dominance is on the rise, as Cowen predicts, while the S&P 500 remains elevated, prompting investors to shift towards Bitcoin.
Benjamin Cowen, a renowned crypto analyst with a vast following of 788,000 subscribers on YouTube, has shed light on the Federal Reserve’s approach to interest rates and its impact on altcoins. Cowen maintains that the Federal Reserve will maintain higher interest rates, potentially to the detriment of altcoins, until a corrective move in the S&P 500.
Federal Reserve’s Cautious Approach
Cowen’s assessment revolves around the Federal Reserve’s conservative stance on interest rates. He observes that the central bank will be unlikely to cut interest rates unless the S&P 500, a leading indicator of the broader stock market, experiences a substantial correction. According to Cowen, the Federal Reserve’s attention is largely drawn to the S&P’s performance, and only when it exhibits a substantial dip will they consider taking action.
“Liquidity is flowing from high risk to low risk. [It] doesn’t mean the lower risk things can’t drop, it’s just that when they drop, that normally marks the end because when they drop then the Fed notices. When the S&P drops, then the Fed starts to notice.”
Benjamin Cowen
Cowen emphasizes that the Federal Reserve has little concern for the S&P 500’s performance when it’s at elevated levels. Only as it approaches lower levels, such as 3,500 or 3,400, will the Federal Reserve likely start taking corrective measures by cutting interest rates. This, according to Cowen, will signify a potential turning point for altcoins concerning Bitcoin.
Bitcoin Dominance and Altcoin Struggles
While the stock market remains at elevated levels, Cowen foresees a scenario where Bitcoin’s dominance (BTC.D), a metric that measures the proportion of the total cryptocurrency market capitalization held by Bitcoin, will continue to rise. This phenomenon, in turn, would cause many altcoins to lag behind the leading cryptocurrency.
Historically, Cowen points out that BTC.D typically reverses its upward trajectory when the Federal Reserve embarks on a rate-cutting cycle. However, as of now, there has been no sign of the Federal Reserve initiating such rate cuts. Last time, during the previous cycle, it took another month or two after the initial rate cut for BTC.D to peak. This raises a crucial question of why should one assume that BTC.D has already reached its peak this time.
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Current Market Snapshot
As of the time of writing, the S&P 500 stands at 4,117.3 points, while BTC’s market dominance hovers around 54%. This data highlights the Federal Reserve’s ongoing reluctance to act, given the S&P’s relatively high level. Until the stock market’s correction materializes, Cowen expects crypto investors to continue shifting their investments from altcoins to Bitcoin.
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Conclusion
According to Benjamin’s analysis the fate of altcoins, in relation to Bitcoin, seems intertwined with the performance of the S&P 500. Until a significant corrective move occurs in the stock market, the dominance of Bitcoin is likely to persist, leaving many altcoins in its shadow. Investors in the cryptocurrency world would be wise to keep a close watch on the S&P 500, as its fluctuations may dictate the trajectory of their favorite digital assets. It is also a high possibility that the Fed is focusing on the same metric at the moment.
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