October 2nd Bitfinex Alpha | Limited Bitcoin supply and options prices hint at more volatility ahead.
On Bitfinex Alpha
Today’s market surge will come as no surprise to regular readers. Bitfinex Alpha.
Bitcoin on exchanges has been declining rapidly since March 2020 and is currently at its lowest point since early January 2018, severely limiting supply.
Long-term holders of BTC are resolutely in “HODL” mode, with the 3+ year old Bitcoin supply remaining largely inactive since February 2023. The short-term holder group is slightly more willing to sell, but our analysis of the produced output Age Bands shows that some Bitcoins that have been dormant for 12-18 months are re-entering the market, while some Bitcoins that have been held for 6-12 months shows that it is still mostly stagnant.
The options market is starting to show signs of market action this week. Bitcoin’s potential price fluctuations became apparent when implied volatility exceeded historical volatility. This is often a reliable indicator that traders are expecting much higher volatility in the near future. This view was also reflected in recent stock market performance.
Confidence in the market remains supported by a healthy economic outlook, but some concerns remain. A strong labor market continues to be a key driver of U.S. economic growth, strengthening hopes for a soft landing for the economy. Despite the surge in overall inflation, relatively low core inflation numbers were reported in August, validating the Fed’s decision to keep interest rates on hold.
However, we continue to highlight areas of risk, including the ongoing United Auto Workers strike, the resumption of student loan payments, rising energy costs, and persistently high interest rates that could hamper spending and economic growth in the coming months.
US consumer confidence also fell in September due to rising interest rates and political tensions. The Consumer Confidence Index showed a significant decline in future expectations. The Federal Reserve has signaled the possibility of further interest rate hikes by the end of the year, and monetary policy is expected to remain tight through 2024. On the housing front, U.S. home prices rose in July, despite higher mortgage rates and less desire to buy a home. Housing prices.
Against this backdrop, the pace of cryptocurrency adoption remains hampered by regulatory delays. The SEC said its decision on the most recent Ethereum futures ETF application has been postponed until December, and that other Bitcoin spot ETF applications that were scheduled to be decided this month are also expected to be delayed.
Meanwhile, we’ve seen Taiwan’s regulator set new industry guidelines, sparking a proactive response from the local cryptocurrency industry, and major exchanges coming together to form self-regulatory organizations. In other news, Terraform Labs’ former CEO Dodo Kwon continues to fight extradition from Montenegro, while the IcomTech founder pleaded guilty to wire fraud charges related to an alleged cryptocurrency Ponzi scheme.
Happy trading!