May 13th Bitfinex Alpha | Despite recent price declines, Bitcoin has never looked stronger
On Bitfinex Alpha
Bitcoin’s fundamental strength is that it is unwaveringly secure. As the network celebrated its billionth transaction last week, we were reminded that in addition to all the properties Bitcoin holds as a store of value and a hedge against monetary policy inflation, it is still a fast and cheap way to transfer assets peer-to-peer. – Peers without any intermediaries, banks, or governments acting as centralized institutions.
However, last week Bitcoin came under selling pressure, dropping its price from around $65,000 at the beginning of the week to $60,000. It appears that the selling entities were mainly short-term holders (holders of less than 155 days), but no long-term investors joined. In fact, the previously observed distribution of long-term holders in April appears to have weakened, and according to on-chain data, they do not appear to have participated in the recent sell-off.
If this trend continues, we could soon conclude that a bottom has already been formed and the upside potential has increased. The recent volatility in daily net inflows into US Bitcoin ETFs suggests mixed investor sentiment, indicating that the price may have reached a near-term bottom. For example, last Wednesday there were no inflows at all except for one of the US Bitcoin ETFs. On Friday, Blackrock’s popular ETF saw internal inflows, but these were smaller than outflows from GBTC, the Greyscale ETF. However, last Monday and last Friday, all funds, including GBTC, saw net inflows. These continued capital flows into BTC ETFs, with no clear direction either way, support our view that the bottom may be close to being reached.
Even in the macroeconomics, we can see markets changing cautiously before a clear direction emerges. The Federal Reserve’s hawkish approach to inflation has resulted in tightening lending and reducing U.S. wholesale inventories. Declines in both inventory levels and borrowing activity mean companies are bracing for an economic slowdown and adjusting their operating strategies in anticipation of it.
This cautious sentiment is also reflected in consumer behavior. U.S. consumer confidence fell to a six-month low in May, largely due to rising concerns about inflation.
Meanwhile, in the cryptocurrency space, the U.S. House of Representatives passed a resolution opposing the SEC’s requirement that banks list cryptocurrencies held by customers on their balance sheets. Although this is seen as a positive development, President Biden opposed the resolution, defending the need for regulatory guardrails to ensure the stability and integrity of the cryptocurrency industry.
The SEC is also at the center of an ongoing lawsuit against Ripple Labs, with the SEC challenging Ripple’s defense of allegations of recklessness in its XRP trading. The SEC is arguing that it should be able to take punitive action against Ripple to prevent possible future violations, even though the company has not recorded any violations of SEC rules since 2020.
Have a great trading week!