Bitfinex Alpha | BTC bulls are still in effect

February 19 Bitfinex Alpha | BTC bulls are still in effect

Bitcoin showed its resilience this week, hitting a new year-to-date high, with inflows into Bitcoin ETFs continuing, despite – or perhaps because of – higher-than-expected CPI and PPI data.

At $52,700, Bitcoin is up 25 percent since the beginning of the year and 207 percent above its lows in November 2022. This puts Bitcoin at just 28.6 percent below its all-time high, with little supply and increased demand even at higher price levels.

Aside from the continued inflows into Bitcoin ETFs, we can also see that the short squeeze ratio is lower this year, compared to previous years. We assume that there are two other factors at play here. First, large whale investors did not take large short positions, given their expectations that prices would continue to rise; Secondly, they invested more of their resources in the spot market, preferring to invest directly in Bitcoin, rather than through derivatives.

An analysis of the supply distribution now shows that only 11 percent of the total supply is held at a loss, and that less than 6 percent of long-term shareholders, as measured by the entity, are in deficit. Historically, this supply distribution has been a harbinger of early bull market conditions.

Across the broader economy, persistent inflation and a decline in consumer spending have pushed interest rate cut expectations into May or even June.

However, consumer spending, even after showing a decline, is still expected to remain resilient, thanks to the clear trend of slowing inflation over time, as well as a stubbornly strong labor market. Furthermore, the US housing market showed signs of optimism, with homebuilder confidence growing for the third month in a row.

Across the cryptocurrency space, we continue to see regulators and financial institutions around the world taking major steps to protect consumers and harness the innovative potential of cryptocurrencies. The UK Financial Conduct Authority has been at the forefront of consumer protection, issuing more than 2,285 alerts last year to combat cryptocurrency promotions from unlicensed providers.

In South Korea, there has also been a notable increase in vigilance against illicit cryptocurrency activities, with reports of suspicious cryptocurrency transactions rising by 48.8% in 2023. In response, the FIU is developing a system designed to stop suspicious transactions pending investigation. . This reflects the growing global trend towards stricter oversight of the cryptocurrency market.

However, in the United States, Federal Reserve Governor Christopher Waller highlighted that stablecoins pegged to the US dollar, which have expanded with the growth of decentralized finance, and which remain central to cryptocurrency trading, are enhancing the superiority of the US dollar. Although synthetic by design, the use of dollar-backed stablecoins only serves to boost demand for the US currency.

Adding to this narrative of how cryptocurrencies and blockchain can foster innovation, Citibank announced a successful proof of concept exploring the tokenization of 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 the digital transformation of asset management.

Have a great trading week!