08 January Bitfinex Alpha | Bitcoin is volatile ahead of ETF decision
In Bitfinex Alpha
Bitcoin wouldn't be the best if the year didn't start with a bang! After ending the last quarter of 2023 with a 57 percent rise, capping a 155 percent increase for the year, within 3 days of 2024, Bitcoin fell by 11 percent on the auspicious day of January 3rd – the day of the Bitcoin creation block. The report that the long-awaited spot Bitcoin ETFs may never be approved has led to billions of dollars in open interest being wiped out, accompanied by significant liquidations in both long and short positions. While such developments are always chastening, we believe they are also healthy and entirely predictable.
On-chain metrics also tell an interesting story: December 27 — a typical day for the price of Bitcoin — saw a spike in coin days, suggesting strategic positioning by long-term Bitcoin holders, perhaps in anticipation of pivotal regulatory decisions regarding the ETF. The long awaited for Bitcoin.
As we noted in Bitfinex Alpha According to the 2024 Forecast Report, we believe that the market remains vulnerable to declines, especially around the $44-45,000 level, and remains highly sensitive to any regulatory developments.
The new year also begins with an economic vision for the United States that appears complex but positive. New data from the construction sector shows that spending is increasing year-on-year, indicating an expansion in demand and investment, despite manufacturing falling into contraction territory, not only in the United States but also in the euro zone and China.
In the latest Fed minutes from the last meeting in December, policymakers made clear their view that interest rates appear to have peaked, with most officials anticipating a shift toward lower interest rates by the end of 2024.
But one factor that may cloud that view is the labor market, which far exceeded expectations in December in terms of new jobs added. Any further evidence of growth would raise inflation fears again, and officials will be wary of cutting interest rates too early.
On the news front, the year also started with a number of positive developments, starting, of course, with ETF preparations being made by some of the largest asset managers, as they all vie for a spot to launch a regulated spot Bitcoin ETF product.
Visa, one of the world's largest credit and debit card companies, also unveiled a Web3-based loyalty rewards system, allowing its customers to accumulate digital assets, such as token tickets and loyalty coins, that can be used in both virtual and physical experiences.
Beleaguered cryptocurrency lending platform Celsius also revealed that it was giving away its ether holdings to repay its creditors. Meanwhile, the Bank of Spain announced a test program for wholesale central bank digital currencies, inviting participation from the finance and technology sectors to explore how these currencies could be used in the movement of money and settlement of financial assets.
It's been an interesting start to the year. Happy trading!
