December 11 Bitfinex Alpha | Beware of price corrections
In Bitfinex Alpha
This week's on-chain analysis focuses on what we consider to be key inflection points for the Bitcoin market and where it goes from here. BTC's recent surge has seen it reach a major resistance level at $45,000. This represents an increase of more than 170% since the beginning of the year, and we could see a full rebound of the 64% contraction in 2022. But the decisions of the group of key investors – the so-called medium-term investors (hold for 2-3 years) – who make up about 16 percent of the active supply of Bitcoin and a significant portion of the realized market cap is crucial.
On the positive side, the supply of Bitcoin on centralized exchanges has reached a six-year low, marking the 45th consecutive month of diminishing supply. This trend is seen as a bullish signal, indicating a shift towards long-term holding solutions or decentralized custody and a decreased desire to sell. In addition, the number of Bitcoin deposit transactions on exchanges has reached a multi-year low, indicating a decline in selling pressure.
However, Bitcoin's EPS ratio has remained above one for 44 consecutive days and indicates that a significant portion of Bitcoin holders are currently profitable. This is especially the case for long-term bondholders. This relatively long period of profit-taking raises concerns about the rally being extended too far, as similar trends in the past have preceded market corrections.
Recent price movements around the $44,000 to $45,000 levels show an interaction between the spot and permanent markets. Closing short positions in perpetual markets has helped push the price higher, although the market faces potential volatility and corrections at these higher levels. Overall, while the current market is showing signs of upside potential, investors should be wary of potential consolidations or pullbacks.
The current US economic landscape remains mixed, although we believe rate cuts are over for now, with a cool labor market and consumer credit growth contrasting with improvements in productivity and an uptick in hiring.
October saw a significant decline in job opportunities in the United States, reaching their lowest level in more than two and a half years. This decline, part of a trend observed since early last year, indicates a slowdown in labor demand, largely due to the impact of higher interest rates.
Slowing credit growth also indicates tightening lending standards and the impact of rising interest rates, indicating more caution in consumer spending and borrowing. Meanwhile, the number of Americans filing for unemployment benefits remained stable with only a slight increase, indicating a decline in the number of layoffs despite slowing hiring rates. The Fed now faces the challenge of balancing further rate hikes with the need for economic stability.
In recent cryptocurrency news, Hive Digital Technologies announced a successful investment in Bitmain mining rigs, with returns already being generated due to the recent rise in the value of Bitcoin.
El Salvador has launched a “Freedom Visa” targeting Bitcoin and cryptocurrency millionaires. This program requires an investment of $1 million in BTC or USDt, offering long-term residency and potential citizenship. Japan's ruling coalition also appears more friendly to cryptocurrencies and is considering a tax reform that would exempt companies from taxes on unrealized gains from long-term cryptocurrency holdings.
Meanwhile, in the United States, a bipartisan group of senators introduced the Terrorist Financing Prevention Act. Aiming to limit the use of digital assets to finance terrorist activities, this proposed legislation would enable the US Treasury to prevent transactions with sanctioned entities involved in digital asset transactions. This bill represents an important step in integrating digital currencies into existing financial regulatory frameworks.
Have a good trading week!
