April 01 Bitfinex Alpha | Bitcoin trades within a range, but volatility will continue
In Bitfinex Alpha
Following the significant price rally in March, which saw Bitcoin reach a new all-time high (ATH), we believe we are in a period of range trading, albeit with more volatility than we have seen at similar points in the cycle.
On-chain data indicated that long term holders (LTHs) were selling after the ATH, although this is happening on a smaller scale than seen at previous bull market tops, and this is leading to increased volatility as previously dormant supply enters the market. Profits of over US$2.6 billion were accounted for through on-chain transactions, of which 40 percent were attributable to LTH Group.
However, further analysis using UTXO Age Bands shows that buying also occurs and represents a floor as new investors come in and existing investors increase their positions believing the market can go higher.
Spot Bitcoin ETFs have also become an important mainstay of the market. Positive net flows into ETFs resumed again last week, with negative demand continuing. At the current rate of inflows, demand for Bitcoin is about twice the value of Bitcoin being mined. Put all these pricing dynamics together and we believe we will see a diversified market in the current environment.
Against this market backdrop, the US economy continues to show strength, driven by strong consumer spending, stable inflation, and signs of recovery in many sectors. In February, personal consumption expenditures data showed a higher-than-expected increase of 0.8%. However, personal income growth slowed, leading to the first decline in real disposable income in five months. In our view, this fact will increase pressure on the Fed to start cutting interest rates so as not to jeopardize economic growth.
Currently, the economy continues to show remarkable resilience. Durable goods orders rose 1.4%, indicating that the manufacturing sector appears to have ignored the effects of a tightening monetary environment. Home prices are also on the rise, with the Standard & Poor's CoreLogic Case-Shiller 20-city home price index recording 6.6 percent year-over-year growth.
Further confirming its strength, the US economy's growth rate for the fourth quarter of the previous year was revised to 3.4 percent on an annual basis. Furthermore, consumer sentiment reached its highest level in nearly three years in March, driven by optimism that inflation pressures will continue to ease.
In recent months, the cryptocurrency industry has navigated through turbulent waters, marked by a series of legal and regulatory challenges that underscore the increasing scrutiny it faces around the world. In a significant legal development, a New York judge has pushed back the SEC's lawsuit against Coinbase, while in other markets, Binance's Russian operations are facing regulatory hurdles of their own, leading to the phased shutdown of CommEx, its successor in Russia. Meanwhile, in Africa, Binance faces another kind of challenge as Nigeria accuses the exchange of tax evasion. In addition to the industry's woes, KuCoin and its founders find themselves in the crosshairs of the US Attorney's Office. Accused of violating the Bank Secrecy Act and operating without a proper license, KuCoin's indictment for bypassing US anti-money laundering regulations to launder more than $5 billion indicates a severe failure in compliance.
Have a great trading week!
