09 October Bitfinex Alpha | Bitcoin flows to its long-term holders as volatility jumps
In Bitfinex Alpha
The Bitcoin landscape has seen a major shift in investor dynamics. Bitcoin's short-term supply has now fallen by nearly 1 million BTC since April 13, 2023, with Bitcoin's long-term (LTH) holder supply rising by more than 1 million BTC in the same period. This shift in supply underscores how the market is increasingly changing in favor of long-term investors.
Bitcoin volatility also started in October with a bang. Historical 24-hour volatility rose over 340% on October 2nd, and we expect such conditions to continue for at least the rest of the month. A look at the Bitcoin options market shows that implied volatility remains higher than historical volatility and coincides with similar volatility seen in US stocks.
However, an interesting development has also been seen in the decoupling of Bitcoin's correlation with major US indices. Bitcoin appears to have decoupled from stocks almost completely, as can be seen with the price of Bitcoin reaching the bottom of its current range sometime before the S&P 500, which just rebounded strongly from the 4,200 level.
The broader economy also continues to give mixed signals, although a soft landing looks increasingly likely, in our view.
The housing market is still showing signs of stress, with lower mortgage applications and lower pending home sales, but in contrast, the US manufacturing sector appears to be finally recovering, with the manufacturing PMI sub-index seeing its first expansion in almost a year.
However, the US labor market is showing some signs of decline. While there has been an increase in job opportunities and an increase in employment, there are some subtle signs that the basis for growth is not necessarily sustainable. For example, much of job growth can be attributed to seasonal, holiday-related hiring. In addition, full-time employment in the United States is decreasing.
The news flow from the world of cryptocurrencies is also diverse. Ripple's XRP token scored another win as a judge denied a request by the Securities and Exchange Commission to appeal an earlier ruling that XRP should not be marketed to retail investors as a security.
However, this positive news was tempered by the announcement by Stars Arena, the Avalanche-based SocialFi platform, that it had fallen victim to a security breach that resulted in the loss of nearly $3 million in AVAX tokens. Although it later announced that it had received enough funds to compensate for the losses, this is not reassuring to advocates of such decentralized platforms. Meanwhile, Thorswap was forced to resort to “maintenance mode” after discovering illicit transactions dating back to the FTX hack, causing its native token, RUNE, to decline by 9 percent. As the platform halted trading operations, it came under increasing criticism for doing so.
Have a good trading week!
