Bitfinex Alpha | More withdrawals are possible even as BTC markets deepen, expand and diversify

January 22 Bitfinex Alpha | More withdrawals are possible even as BTC markets deepen, expand and diversify

With Bitcoin's sharp decline at the end of last week, there was a significant decline in unrealized gains, especially among short-term holders. We believe this may contribute to a potential increase in selling pressure, especially among new buyers.

The tendency of this group to react more sharply to short-term market fluctuations could lead to an intensification of the sell-off, and we anticipate the possibility of another major market correction, with critical support levels for Bitcoin at just $38,000 and $36,000. These levels correspond closely with the realized price of the short term holder discussed last week Bitfinex Alphaare considered pivotal in measuring short-term Bitcoin market stability and investor sentiment.

On a macro level, December saw a surprise surge in retail sales driven by strong car purchases and a significant rise in online shopping. This strong retail sector activity, coupled with higher-than-expected consumer sentiment, suggests an upside risk to inflation, prompting markets to reconsider the extent of a rate cut. We still believe policy easing is likely, but it is important to monitor the data.

At the same time, the manufacturing sector, which represents 10.3% of the economy, saw only a marginal increase in output as it continues to face constraints imposed by the tight monetary policy in place since March 2022. January further confirmed this trend, revealing a growing slowdown In factory activity.

The manufacturing industry remains cautiously hopeful that conditions will improve, and adding to the economic narrative, the fall in January unemployment claims to a 16-month low highlights the continued strength of the labor market. But more data is key to forming a more rigorous forecast of the economic outlook.

In the latest news from the cryptocurrency space, the South Korean government has signaled a potential greater openness to approving local spot bitcoin ETFs, following the successful launch of the same product in the US earlier this month. In fact, in the past two weeks since the launch of 10 Bitcoin ETFs in the US, their popularity has meant that they have now surpassed silver ETFs in terms of assets under management. This significant milestone not only underscores the growing acceptance of Bitcoin in the market, but also reflects a paradigm shift in investment preferences.

Last week saw a further deepening and potential diversification of the Bitcoin ETF market, as ProShares, the original issuer of Bitcoin ETFs tied to BTC futures markets, placed orders for five new ETFs tied to leveraged and inverse BTC options. The increasing range of ways to gain exposure to Bitcoin is very healthy for the underlying market.

We are now in a more developed, more liquid and more mature market than just a few months ago. Although the new Grayscale ETF saw outflows as investors looked to exit the previous locked-in BTC trust that Grayscale shifted to move to cheaper investment options, this is further evidence of the market spreading its risks and increasing its volume. However, Grayscale maintains a massive presence in the market, holding more than half a million bitcoins. This large holding underscores the company's ability to influence the broader market, a factor that becomes increasingly critical if the current rate of outflows continues.

Happy trading!