05 February Bitfinex Alpha | Bitcoin miners are squeezing BTC
In Bitfinex Alpha
In this week's series report, we identified that much of the recent decline in Bitcoin prices, particularly following the SEC's approval of spot Bitcoin ETFs, can be attributed to selling by Bitcoin miners, who used the rise in BTC as a catalyst to exit their positions. Or benefit from it.
Miners in particular are tempted to sell given the upcoming halving this year, which will see Bitcoin rewards and thus miner profitability reduced. The sale now provides capital for miners to upgrade infrastructure and is a reminder of the significant influence miners have on market liquidity and price discovery. BTC miners' reserves dropped significantly shortly after the ETF approvals, and last week once again saw the largest outflows from mining wallets ever – suggesting that further selling may be imminent.
However, despite some movement in legacy coins recently, the majority of Bitcoin supply has remained idle, suggesting that long-term holders are holding out.
However, from our point of view, it is important to monitor a variety of on-chain indicators to predict the market price. For example, the Days of Destructive Value measure has risen, indicating a period of large coin movements by relatively new holders (1-2 years category) that has historically preceded a potential market top. But entity-adjusted vitality remains near multi-year lows, reinforcing the narrative of a market with resilient investors.
In the broader economy, the Fed's recent decision to keep interest rates between 5.25 and 5.5 percent, coupled with ongoing quantitative tightening, reflects the need to balance the buoyant pulse of the economy – characterized by a strong labor market and rising consumer confidence – against underlying inflation risks.
The labor market in the United States, in particular, is witnessing exceptional activity, defying expectations, with a significant increase in job opportunities. This resilience, reinforced by the upward revision in numbers for previous months, confirms that the labor market is too strong for the Fed to consider cutting interest rates this quarter, as we believe. This sentiment is echoed in the rise in consumer confidence reported by the Conference Board, reaching a peak not seen since December 2021 and reflecting the positive mood in the economy.
However, within this positivity, there is a clear shift. The slowest pace of growth for the Employment Cost Index since June 2021 indicates a moderation in labor costs, providing a beacon of relief amid inflationary concerns. This moderation must be encouraged and the Federal Reserve's decision to keep interest rates steady should be supported, while its continuation would strengthen confidence that inflation is gradually declining.
In the latest news from the cryptocurrency space, Bitfinex Securities recently marked its entry into the El Salvador market, establishing itself as the first registered and licensed digital asset services provider in the country. With the approval of El Salvador's National Digital Assets Commission, the launch reinforces the country's commitment to fostering a Bitcoin-based economic framework.
It was also announced this week that Tether launched Tether Edu to address the growing need for digital literacy and skills, with a particular focus on emerging markets. This program aligns with Tether's vision to promote economic empowerment through blockchain technology and stablecoin awareness. Tether Edu seeks to pave the way for informed and responsible participation in the digital economy, ensuring that the benefits of digital assets are available to a broader demographic.
It was also revealed this week that US authorities have charged three individuals allegedly linked to the complex theft of $400 million from FTX digital wallets, shortly after the company declared bankruptcy; Finally, Genesis Global settled a securities class action lawsuit with the Securities and Exchange Commission, agreeing to a $21 million fine related to its Gemini Earn program. This settlement signals the ongoing stringent regulatory scrutiny that cryptocurrency companies face in the United States, and is part of a broader initiative to ensure compliance and stability in the cryptocurrency market.
This trend toward greater regulation and oversight reflects the maturity of the industry and a collective effort to create a safe, regulated, and trustworthy digital asset environment.
Happy trading!
