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Bitcoin dominance declines as crypto scrutiny intensifies

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Bitcoin's market dominance is slipping, with altcoins like Solana (SOL), Pepe (PEPE), and Dogwifhat (WIF) gaining traction last week. Cryptocurrency analysts are suggesting that Bitcoin's long-held dominance over the market could be reaching a turning point. Its market share has seen a slight decline, potentially signaling growing investor interest in altcoins (alternative coins).


This shift aligns with the view that 'alt seasons' – periods when altcoins significantly outperform Bitcoin – are on the horizon.


From my point of view, BTC might experience seasonal dominance based on market conditions. When the market is bullish, altcoins might attract more liquidity due to their higher volatility and potential for rapid upward gains. Conversely, during bearish markets, BTC might regain higher market dominance as investors seek the relative safety of the more established cryptocurrency.


Bitcoin's dominance, which currently sits at 53.90%, experienced a 1.75% drop over the past week. While this figure remains up 4.63% since the beginning of 2024, it suggests a potential shift in investor preferences. Recent gains by altcoins like Solana (SOL), Pepe (PEPE), and Dogwifhat (WIF) support this observation.


However, overall market sentiment is marked by caution. Bitcoin's price has declined 10.44% in the past week, and heightened investor fear levels suggest uncertainty. This could lead some investors to favor the perceived stability of Bitcoin over riskier altcoins.


The Federal Reserve's decision to maintain current interest rates comes as no major surprise to markets. This pause follows a string of consecutive rate hikes aimed at tackling inflation. While short-term inflation expectations have been fluctuating, longer-term expectations remain anchored, indicating that the Fed may hold rates steady for some time. This decision has resulted in a muted market reaction, with both cryptocurrencies and traditional stock indices showing minimal movement. Bitcoin, in particular, continues to hover below the $60,000 mark, with analysts anticipating potential downward pressure in the near term.


Analysts suggest that the Fed's policy trajectory will significantly influence the cryptocurrency market. Persistent inflation could discourage investors from riskier assets like Bitcoin and altcoins. However, if the Fed can carefully navigate a path towards reduced inflation while supporting economic growth, the resulting market stability could prove beneficial for the cryptocurrency landscape. Ultimately, the balance between the Fed's actions and evolving market conditions will hold the key to determining the direction of Bitcoin and the broader cryptocurrency sector.


Meanwhile, Changpeng Zhao (CZ), the former CEO of global cryptocurrency exchange Binance, has been sentenced to four months in federal prison. This follows his guilty plea to failing to implement an effective anti-money laundering (AML) program within the exchange. The sentence marks a significant turning point for crypto regulation as CZ becomes one of the industry's highest-profile figures to face jail time.


CZ's sentence stands in sharp contrast to the 25 years former FTX CEO Sam Bankman-Fried (SBF) faces for alleged fraud and misuse of customer funds. While both cases involve legal violations, CZ's charges focus on regulatory oversight, whereas SBF is accused of intentional deception and large-scale theft.


Legal experts emphasize the importance of compliance for cryptocurrency companies. Zhao's imprisonment demonstrates the increased scrutiny the crypto sector faces from US authorities, signaling the end of a less regulated era. While CZ's jail time is relatively brief, the impact could be significant for both Binance and the broader market. Market confidence in Binance may be shaken, opening the door for competitors. The case also underlines the ongoing debate surrounding the need for clear and robust crypto regulations.


Zhao has accepted the sentence, stating he will complete his jail time and focus on education-based initiatives after his release. Binance emphasizes its commitment to regulatory compliance. The exchange still faces a separate legal challenge from the US Securities and Exchange Commission, adding complexity to its future trajectory.


The week in crypto continued with Jack Dorsey's Block, the company behind Square and Cash App, reportedly facing a federal investigation for alleged compliance violations, specifically within its Bitcoin business. US prosecutors have been investigating Block's internal processes, including a spotlight on its cryptocurrency transactions.


A former employee, who claims the company has "widespread and years long compliance lapses," has provided information to prosecutors. Block allegedly mishandled cryptocurrency transactions involving terrorist groups and economically sanctioned countries like Iran, Russia, Cuba, and Venezuela.


Furthermore, the company reportedly failed to address compliance concerns and may not have reported the majority of suspicious transactions, including Bitcoin transactions, to the government.


Block has issued a statement emphasizing its commitment to compliance, highlighting their systems, tools, and processes for sanctions screening. The company also states it is continually improving its safety and security measures and invests significantly in its compliance program.


The whistleblower, who provided a substantial amount of supporting documents, alleges that Block's compliance structure was deeply flawed and that Block executives were aware of the pitfalls. Block disputes this claim, stating it has voluntarily reported numerous flagged transactions to the Office of Foreign Assets Control.


The legally heavy week in crypto also involved Roger Ver, a somehow controversial figure in Bitcoin's history and author of the recently released book 'Hijacking Bitcoin,' has been arrested in Spain on tax fraud charges. This arrest follows a US indictment alleging he concealed Bitcoin holdings to avoid over $48 million in taxes. Ver, once known as 'Bitcoin Jesus,' was a vocal advocate for increasing Bitcoin's blocksize, leading him to support the Bitcoin Cash (BCH) fork.


The US Justice Department claims Ver attempted to evade an 'exit tax' by strategically shifting Bitcoin ownership prior to renouncing his U.S. citizenship. They also allege he provided false information to his attorney. Spanish authorities are holding Ver pending extradition to the United States, where he faces a potential trial and prison sentence.


**Disclaimer:** The information provided in this article should not be considered financial advice. The cryptocurrency market remains dynamic and carries risks. It's essential to conduct your own thorough research and consult with qualified professionals before making any investment decisions.


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