Bitfinex Alpha: If Bitcoin's dominance has reached a local peak, small-cap coins may outperform the market in the coming months

ChainCatcher message, Bitfinex Alpha report shows that Bitcoin fell 10.7% in the first week of September, continuing the downward trend since the end of August, with the price dropping below the key low of $56,711 on May 1. This sell-off has led to a reduction in leveraged positions, and the market may be approaching a local bottom.

The performance of the U.S. stock market, especially the S&P 500 index, recorded its worst weekly performance since March 2023 last week, which is crucial for Bitcoin's short-term trend. The correlation between Bitcoin prices and traditional financial markets remains, with significant outflows from Bitcoin ETFs over the past week, totaling a net outflow of $706.1 million since August 27. In contrast, the small-cap market has shown resilience. Last week, Bitcoin's market cap share decreased by 1.3%, while the market cap of other crypto assets, excluding the top 10 coins, grew by 4.4%. This shift suggests that investors may be seeking value in small-cap coins.

However, the open interest in small-cap coins has also decreased by 55% from historical highs, indicating a weakening of speculative sentiment.

Analysts believe that if Bitcoin's dominance indeed reaches a local peak, small-cap coins may outperform the broader market in the coming months, laying the groundwork for a bull market in the fourth quarter.