BTC dominance hits a new high, CPI overall lower than expected, will rate cut be far away?

Author: Alvis

Bitcoin's dominance in the cryptocurrency market continues to rise, reaching a new high on March 12, 2025. At the same time, the market is closely watching the monetary policy of the Federal Reserve, especially as the US inflation data came in lower than expected, leading to an increase in rate cut expectations. These factors have not only affected the price trends of Bitcoin and altcoins, but also reflect deeper changes in the global macroeconomy and the crypto market.

Bitcoin dominance on the rise, altcoin frenzy receding

Bitcoin outperforms the overall crypto market

Despite the price of Bitcoin falling since early 2025, it still shows stronger resistance to decline compared to other cryptocurrencies.

Tradeview data shows that as of March 13, Bitcoin's market dominance has reached 62.14%, far higher than 54% in December 2024, setting a new high since March 2021. This trend indicates that amidst market fluctuations, investors are more inclined to hold Bitcoin rather than riskier altcoins.

The continued rise of Bitcoin's dominance indicates that the short-lived bull market of altcoins is difficult to sustain. This situation was already evident by the end of 2024, when altcoins experienced a rapid rise in just one month, but quickly fell back due to changes in macroeconomic data.

Market cycles and capital flows

In history, whenever the market enters a bull market or nears its end, the dominance of Bitcoin tends to rise. This is because when market risk aversion intensifies, investors are more inclined to turn to Bitcoin rather than higher-risk small-cap crypto assets.

However, from the perspective of active user data, some funds and on-chain activities are gradually flowing to Ethereum and other Layer 1 networks, such as Ton and Trx. This indicates that although Bitcoin remains a safe haven for investors, in terms of ecosystem activity, its competitors are catching up.

Market sentiment is warming up, with long-term holders taking the lead

In terms of Bitcoin's own market data, today's turnover rate has declined, while the VIX fear index of the US stock market is also showing a downward trend, indicating that market sentiment is gradually recovering. However, despite the easing of panic sentiment, the current turnover rate and VIX remain at relatively high levels, suggesting that the market has not completely emerged from the volatility range. It is worth noting that the CME Bitcoin futures price is less than $150 away from filling the last short-term gap. If market sentiment remains stable and no new negative factors emerge, this gap is expected to be filled tomorrow.

In addition, the U.S. stock market performed well, with the Nasdaq index rising 1.22% and the S&P 500 index rising 0.49%. If there are no unexpected changes in the U.S. stock market after hours, it may further boost market confidence.

From the chip data, the dense chip area of $93,000 to $98,000 remains stable, and there is no sign of panic selling. This indicates that most investors in this range choose to continue holding rather than cutting their positions due to short-term pullbacks.

Although some investors are experiencing floating losses in this price range, market data shows that they are gradually transforming into long-term holders, preventing the price decline from triggering large-scale panic selling. This trend indicates that the market structure is changing, with more chips shifting from short-term speculators to long-term holders. In the future, if Bitcoin returns to $95,000, it may face some selling pressure, but before that, the market is mainly influenced by ultra-short-term investors, which is also evident from the turnover rate data.

Interest rate policy has become a key variable in the market

The Fed delays rate cuts, and Bitcoin is under pressure

In January 2025, the Federal Reserve decided to keep interest rates unchanged at the latest monetary policy meeting, citing the continued strength of the U.S. labor market and the lack of economic data supporting an immediate rate cut. This decision reinforced market expectations for the Fed to continue its hawkish stance, putting pressure on risk assets including cryptocurrencies.

Since the Federal Reserve announced to maintain interest rates on January 29th, the spot price of Bitcoin has dropped from $109,000 (December 2024 high) to $83,550 (as of March 13), a decrease of nearly 25%. It is worth noting that the altcoins have seen a larger decline, reflecting intensified market risk aversion.

Smart traders have withdrawn from altcoins and turned to Bitcoin to reduce losses. Despite the price drop of Bitcoin itself, it still outperforms the overall crypto market.

CPI data lower than expected, rate cut may come earlier

The latest U.S. Consumer Price Index (CPI) data released for February came in below market expectations, leading to an increase in market expectations of a Fed rate cut later this year. The data shows that the CPI annual rate is 2.8%, lower than the previous expectation of 2.9%, and the overall CPI also dropped by 0.1%. This signal reinforces market confidence in a Fed rate cut later this year.

21Shares crypto research strategist Matt Mena pointed out that the decline in inflation data may prompt the Fed to accelerate its rate cuts, and rate cuts usually provide more liquidity to the market, thereby boosting the prices of Bitcoin and other risk assets.

Most market participants believe that the Federal Reserve will cut interest rates before June 2025. Source: CME Group

Mena further analyzed:

The market's current expectation of a rate cut in May has risen to 31.4%, triple the increase from last month, while the expectation of three rate cuts by the end of the year has surged to 32.5%. Even 21% of market participants believe that the Fed may cut rates four times.

Trump administration's policy and market games

Can Trump push for a rate cut?

Despite market expectations of a rate cut by the Federal Reserve in 2025, comments from Federal Reserve Chairman Jerome Powell and other officials indicate that they are not in a hurry to take action. For example, Federal Reserve Board Governor Christopher Waller emphasized in a speech on February 17 that the central bank should be patient and not rush to cut interest rates before further decline in inflation.

However, the attention of the US political arena to interest rate issues is on the rise. Market analyst Anthony Pompliano even speculated that the Trump administration may force the Fed to cut interest rates by creating market turbulence. On March 10, Pompliano pointed out on social media:

The Trump administration may have deliberately created market panic to push the Fed to cut interest rates faster in 2025.

Debt issues may become a key driver of interest rate cuts

The U.S. government has about 9.2 trillion dollars in debt, which will mature in 2025 if no refinancing is done.

In addition to political factors, the U.S. debt issue is also a key variable affecting interest rate decision-making. According to the Kobeissi Letter, the U.S. government needs to complete $92 trillion in debt refinancing by 2025. If refinancing cannot be completed at a lower interest rate, the interest burden on the national debt (which has exceeded $36 trillion) will further increase.

Due to this risk, the Trump administration has made interest rate cuts a core focus of its economic policy. Analysts believe that if the market continues to decline, Trump may intensify pressure on the Fed in an attempt to force a loosening of monetary policy.

Bitcoin future trend outlook

At present, the price trend of Bitcoin is mainly influenced by macroeconomic policies, market liquidity, and investor risk preferences. In the short term, the decisions of the Federal Reserve will become the focus of market attention:

If the Federal Reserve cuts interest rates early, Bitcoin is expected to benefit, and prices may rebound.

If the Fed continues to maintain a hawkish stance, Bitcoin may continue to be under pressure in the short term, and the market may further converge towards Bitcoin, weakening the market position of altcoins.