Bitfinex Alpha | Bitcoin is likely to see additional price declines, even as the market grows, expands, and diversifies.

January 23 Bitfinex Alpha | Bitcoin is likely to see additional price declines, even as the market grows, expands, and diversifies.

Bitcoin's sharp decline at the end of last week led to a significant reduction in unrealized gains, especially among short-term holders. We believe this may lead to increased selling pressure, especially from new buyers.

The trend of this group is more sensitive to short-term market fluctuations, which can cause stronger selling. We anticipate the possibility of a major market correction, with major support levels for Bitcoin remaining at $38,000 and $36,000. These levels, which are close to the short-term holders' strike prices discussed in Bitfinex Alpha last week, play an important role in gauging short-term market stability and investor sentiment towards Bitcoin.

On a macro level, December saw a significant uptick in retail sales driven by strong vehicle purchases and a significant increase in online shopping. This strong retail sector activity, coupled with higher-than-expected consumer sentiment, indicates higher inflation risks, prompting markets to reconsider the certainty of interest rate cuts. We still believe policy easing is likely, but we need to monitor the data closely.

In contrast, the manufacturing sector, which represents 10.3% of the economy, saw only slight growth in output, as it remained constrained by the tight monetary policy implemented as of March 2022. An Empire State report issued by the Federal Reserve Bank of New York in early January stressed this The command. trend, indicating a deeper decline in factory activity.

The manufacturing sector remains cautiously optimistic that the situation will improve, and adding to the economic picture, unemployment claims falling to a 16-month low in January demonstrated the continued strength of the dynamic labor market. But more data is needed to make more solid predictions about the economic outlook.

In the latest news from the cryptocurrency sector, the South Korean government has appeared more open to approving a domestic bitcoin ETF, after successfully launching a similar 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 seen them overtake silver ETFs in assets under management. This not only highlights the growing market acceptance of Bitcoin, but also reflects a paradigm shift in investment preferences.

Last week saw further diversity and depth in the Bitcoin ETF market, as ProShares, the issuer of the first Bitcoin ETF tied to the Bitcoin futures market, filed for five new ETFs tied to Bitcoin Leverage and Inversion. The increasing diversity of approaches to Bitcoin is very healthy for the underlying market.

We are now in a more complex, liquid, and perhaps more sophisticated market than we were a few months ago. Although the Grayscale ETF has seen outflows as investors exited previously closed BTC funds that Grayscale converted into cheaper investment options, this is also evidence that the market is spreading risk and scaling up. However, Grayscale still has an important position in the market, owning more than half a million Bitcoins. This large stake underscores the company's ability to influence the broader market, a factor that will become increasingly important if the current pace of withdrawals continues.

Happy trading!