Bitcoin (BTC) Dominance Rises Sharply Before FOMC as Imminent Volatility Approaches

On Tuesday, Bitcoin (BTC) reinforced its position in the cryptocurrency market, achieving its highest dominance level in four years. This surge is attributed to traders reallocating their investments into BTC as they prepare for an important Federal Reserve policy meeting scheduled for tomorrow.

The price of BTC remained stable, hovering between $94,000 and $95,000, reflecting a modest increase of 0.4% over the last day. This consolidation follows a consistent trading pattern that has been evident since the weekend.

In contrast, the broader CoinDesk 20 Index experienced a 0.7% decline, pulled down by the performances of Ethereum’s ether (ETH) and the native tokens of Sui (SUI), Aptos (APT), and Polygon (POL).

Stock markets showed signs of weakness, with the S&P 500 and Nasdaq both closing down by 0.7% to 0.8%, illustrating underperformance relative to cryptocurrency benchmarks like BTC.

While fluctuations have been minimal, attention is increasingly focused on Bitcoin’s expanding share of the overall cryptocurrency market. The Bitcoin Dominance metric has exceeded 65%, a peak reminiscent of early 2021, indicating a trend in capital movements toward BTC, often viewed as a stable asset amid ongoing macroeconomic challenges.

Market strategist Joel Kruger from LMAX Group commented on the current environment as one marked by cautious anticipation. He noted that the cryptocurrency market remains relatively inactive since the beginning of the week, with prices stabilizing as participants await critical developments, particularly from traditional markets or the Federal Reserve’s impending FOMC decision.

Predictions indicate that the Federal Reserve is likely to maintain current interest rates, according to relevant market indicators. However, investors are anxious about any potential shifts in the rhetoric of Fed Chair Jerome Powell, which could influence risk tolerance moving forward.

Expected Surge in Bitcoin Volatility

With Bitcoin’s recent market behavior showing little movement, analysts foresee a surge in volatility linked to the upcoming FOMC meeting. Vetle Lunde, head of research at K33, stated that BTC’s short-term volatility has reached an unusually low point, with the seven-day average marking its minimal level in over 563 days.

Lunde explained that periods of low volatility typically do not last long, often giving way to sharp price movements as leveraged positions are unwound and traders become more active. He reassured that a significant downturn is unlikely, given the consistently negative funding rates for perpetual swaps. Historically, such conditions have presented excellent buying opportunities for medium to long-term investors, which he suggests supports a strategy of increasing spot exposure.