Rate Cuts Incoming; $BTC.D in Freefall
- malikrone
- Aug 11
- 3 min read
Updated: Aug 12
In August 2023, we published Catalysts for Digital Asset Growth, outlining three forces we believed would drive explosive upside in 2024:
Spot ETF approvals
The Bitcoin Halving
Cuts to the Federal Funds Rate
By April 2024, the first two had played out. Then, in September 2024, the Fed began cutting rates – a cycle that ended in December of the same year.
Since then, the Fed’s tighter stance has allowed Bitcoin to rally largely on its own, while the rest of the market has lagged. That dynamic is shifting. The Bitcoin trade is now late; the altcoin trade is early.
From Bitcoin to Altcoins
In our 2023 report, we wrote:
"As the Federal Funds Rate stalls and declines, renewed risk allocation will benefit equities and digital assets, favoring lower market-cap assets.” - Level III Capital CEO Jack Zumwalt, Catalysts for Digital Asset Growth, August 2023
We saw this unfold in Q4 2024. Now, Goldman Sachs expects the Fed to cut another 25 basis points in September, with two more cuts to follow. Meanwhile, October brings final SEC decisions on five altcoin ETFs – likely approvals. Together, these catalysts could accelerate capital rotation away from Bitcoin toward smaller-cap assets.
“Goldman Sachs Research shifted its forecast for rate cuts because very early evidence suggests the effects of this year’s tariff policies are a bit smaller than expected and other disinflationary forces have been stronger. Fed leadership may also share our economists’ view that tariffs will only have a one time effect on price levels.” - Why the Fed May Cut Rates Earlier Than Expected, July 2025
Bitcoin Dominance as the Signal
Bitcoin Dominance (BTC.D) has stayed unusually high since spot BTC ETFs launched in January 2023, supported by institutional demand. But history suggests this will not last.
Bitcoin Dominance ($BTC.D) is the percentage of Bitcoin's market capitalization relative to the total market capitalization of all cryptocurrencies. It measures Bitcoin's share of the overall crypto market.
The top chart compares BTC’s price cycle with Bitcoin Dominance (BTC.D). Historically, once BTC breaks into new highs, ETH and other altcoins follow, driving BTC.D sharply lower as liquidity shifts towards non-BTC assets. With ETF applications for ETH, SOL, and others advancing, the setup mirrors prior cycles where Bitcoin’s second leg coincides with accelerating altcoin performance.
Bitcoin dominance has yet to see any material decline since the previous bull run in 2020/2021. Last cycle, dominance nearly halved as altcoins grew significantly against Bitcoin during a risk-on rotation. The ETFs sparked institutional bid into BTC, leading to a strong uptrend with little downside.
If history tells us anything, it says a risk-on monetary environment can give the similar decline in Bitcoin dominance. The backside of this decline is the growth of assets like ETH, SOL, and other crypto alternatives. A break of the existing trend under 60% BTC.D could be a strong indication of market rotation.
Ethereum as the Lead Indicator
Ethereum’s performance has often signaled the next phase of altcoin market growth. ETH is now approaching levels not seen in over 1,000 days, historically a precursor to broader crypto outperformance. In past cycles, sustained ETH strength has marked the start of accelerated capital rotation into the wider altcoin space.
The United States is setting the stage for a global risk-on event. A bearish trending dollar (DXY) historically supports risk assets by lowering borrowing costs, boosting commodity prices, and increasing global liquidity. At the same time, global M2 money supply is making new all-time highs.
These conditions, paired with an expected Fed rate cut in September and likely five new altcoin ETF approvals in October, create one of the most favorable environments for risk assets in years.
Looking back, our August 2023 thesis was on target – spot ETF approvals, the Bitcoin Halving, and Fed rate cuts all played out as expected. Now, with altcoins poised to take the lead, we believe the most compelling directional opportunities in crypto will emerge this year.