February 20 Bitfinex Alpha | Bitcoin's bullish momentum is still valid
In Bitfinex Alpha
Bitcoin showed strong resilience this week, hitting a new high for the year, despite – or perhaps because of – higher-than-expected CPI and PPI data, keeping inflows into Bitcoin ETFs trading right.
At $52,700, Bitcoin is up 25% since the beginning of the year and 207% from its November 2022 low. This puts Bitcoin just 28.6% below its all-time high, with supply limited while demand increases even at higher prices.
In addition to the steady flow of money into Bitcoin ETFs, we are also seeing a lower rate of short squeezes this year compared to previous years. We assume that this is the result of two factors. First, large whale investors did not hold large short positions, with the price expected to continue rising; Secondly, they invested more resources in the spot market, preferring to invest directly in Bitcoin rather than through derivative products.
An analysis of the distribution of supply currently indicates that only 11% of the total supply is at a loss, and an even smaller proportion – 6% of long-term bond holders are also in deficit. History has shown that this supply allocation heralds early bull markets.
In the broader economy, persistent inflation and lower consumer spending have pushed interest rate cut expectations into May or even June.
Although declining somewhat, consumer spending is expected to remain stable thanks to the clear trend of declining inflation over time, as well as a strong labor market remaining strong. Furthermore, the US housing market showed signs of optimism as building confidence witnessed a third consecutive month of growth.
In the crypto space, we continue to see regulators and financial institutions around the world making strides to protect consumers and exploit the innovation potential of cryptocurrencies. The UK Financial Conduct Authority (FCA) is at the forefront of consumer protection, issuing more than 2,285 warnings over the past year against cryptocurrency promotions from unlicensed providers.
In South Korea, there has also been a notable increase in vigilance against illegal cryptocurrency activities, with reports of suspicious cryptocurrency transactions rising by 48.8% in 2023. In response, the FIU is developing a system designed to prevent suspicious transactions pending investigation. . This reflects the global trend towards greater scrutiny of the cryptocurrency market.
However, in the United States, Federal Reserve Governor Christopher Waller emphasized that stablecoins pegged to the US dollar – which are expanding with the growth of decentralized finance (DeFi), which is important for cryptocurrency trading – reinforce the sovereignty of the US dollar. Despite being synthetic currencies, the use of dollar-backed stablecoins only serves the purpose of boosting demand for the dollar.
Adding to the thesis of how cryptocurrencies and blockchain can drive innovation, Citibank has published evidence of success exploring capital tokenization through private equity funds. This move not only demonstrates the practical applications of blockchain technology beyond traditional cryptocurrencies, but also indicates the growing interest of major financial institutions in digital transformation and asset management activities.
Have a great trading week!
