September 25 Bitfinex Alpha | Markets remain stable with oversold conditions
In Bitfinex Alpha
This week we assess the Bitcoin markets and market sentiment by analyzing a range of on-chain indicators.
The prevailing feeling of seller fatigue is evident among short-term Bitcoin holders, as evidenced by SOPR indicators, which show that selling by this group has peaked and appears to have turned around. This suggests that acquiring Bitcoin at these levels may be wise.
In contrast, the dynamics of long-term holders are less dynamic, as this group has long indicated its belief in the asset and continues to act as an anchor for Bitcoin's price. The Net Unrealized Profit/Loss (NUPL) indicator also reflects this view of both short- and long-term shareholders. The latter largely moves coins at a profit, while the former moves at a loss. However, with Bitcoin's value remaining relatively flat over the past few months – even in the face of a percentage gain generated by long-term shareholder spending – it appears that a footing has been found in the market.
However, there is increased volatility during the day. Last week, perpetual futures markets saw more than $44 million in Bitcoin contracts liquidated, with prices moving more than $1,000. Most of these are expected to be prolonged liquidations that occurred as the market declined, but we assess that these moves were exacerbated by very weak spot volumes.
Options trading indicators also add to this narrative. Implied volatility is currently exceeding historical volatility, and a staggering $3 billion worth of options are set to expire at the end of the month, with almost no open interest currently after the two-week expiration.
While volumes are declining and volatility is increasing in Bitcoin markets, the broader economy is also grappling with its future direction. While the Fed has kept interest rates unchanged in order to engineer a soft landing, confidence in some sectors suggests that this may not come easily. Homebuilders are feeling increasingly uncertain about demand with the September NAHB/Wells Fargo index falling to its lowest level since April. This downturn, precipitated by rising mortgage interest rates, has caused the largest slump in three years in housing starts. However, in an upbeat development, August saw a rise in building permits, indicating some demand for new housing.
However, interest rates are not expected to fall anytime soon, and US companies admit that economic conditions will be difficult, with very slow growth reported for September. The services sector is now moving at its slowest pace since February, with new orders declining significantly.
It is encouraging, then, that the news flow in the cryptocurrency space over the past week has been largely positive. Tether announced its investment in Northern Data Group, a German company that provides data center, cloud computing, artificial intelligence, and blockchain services while continuing to support innovative technology. At the same time, Google Cloud announced that its BigQuery service added 11 additional blockchain networks, giving it a total of 19 networks, from which it can obtain and provide data. Also in the DeFi space, PancakeSwap announced its alliance with Transak to add more fiat solutions; While CoinShares has launched its hedge fund division on US shores, providing cryptocurrency portfolio solutions to accredited investors in the US.
Happy trading!
