Bitfinex Alpha | Cryptocurrencies are outperforming traditional assets as the supply side remains tight

06 November Bitfinex Alpha | Cryptocurrencies are outperforming traditional assets as the supply side remains tight

So far this year, Bitcoin and Ether have shown remarkable resilience and growth, significantly outpacing traditional investments. When compared to gold, the value of BTC and ETH increased by 93 percent and 39 percent, respectively. The performance correlation between BTC and Ether has also been remarkably strong throughout the year.

However, during bull trends, Bitcoin has outperformed, due to its first-mover advantage as a crypto-asset, its perceived “digital gold” status, and its broader institutional adoption. Interestingly, while Bitcoin and commodities like gold have reached significant heights, major indices like the S&P 500 and NASDAQ are still in the correction phase. This divergence indicates a potential shift in market dynamics, with cryptocurrencies poised to continue outperforming traditional markets.

Bitcoin's price is now up more than 110 percent since the beginning of the year, with average term holders going from an unrealized loss to a profit. Historical patterns indicate that large price rises often lead to consolidation or sharp declines, especially with an influx of novice investors. However, a measure of declining coin days indicates that long-term holders remain firm, underscoring their belief in Bitcoin's long-term value. Furthermore, wallets containing large amounts of Bitcoin show inactivity, indicating bullish sentiment or a hedge against future uncertainties.

The resilience of crypto assets this year also reflects a Federal Reserve that is maintaining its grip on the economy — but not tightening further. In a widely expected move, the Federal Reserve kept benchmark interest rates steady between 5.25 and 5.50 percent, while updating its forecasts for the US economy, indicating increased confidence.

Despite this optimistic stance, the US manufacturing sector still saw a decline in activity in October. This contraction was largely due to strikes at major automakers, suggesting that labor disputes are having a greater impact than previously recognized.

The manufacturing sector's difficulties have rippled through the broader economy, as job growth across the United States has lost momentum. Wages also rose at their lowest rate since mid-2021 over the past year, indicating a potential shift in labor market dynamics.

In the latest news from the cryptocurrency space, Sam Bankman-Fried has been found guilty of charges including wire fraud and money laundering following the dramatic collapse of FTX. This development came in the wake of incriminating testimony from key insiders.

Meanwhile, PayPal's entry into the stablecoin space with PYUSD has hit a snag, with the SEC issuing subpoenas to the company, signaling the continued scrutiny crypto entities face in the US.

More positively, the National Bank of Georgia is exploring a partnership with Ripple to pilot a digital Georgian lari. The project underscores Georgia's commitment to integrating blockchain technology into its financial systems, amid a global rise in exploration of central bank digital currencies.

Happy trading!