March 4th Bitfinex Alpha | As ETF flows continue, BTC price will likely rise further.
On Bitfinex Alpha
Open interest for Bitcoin futures and perpetual pairs on centralized exchanges has risen to over $26 billion, setting a new record. The surge in OI reflects the bullish momentum of BTC, which rose 44% in February, its best monthly performance in percentage terms since December 2020.
Net inflows into Bitcoin ETFs (currently $7.5 billion) are of course an important driver, and we believe there will be more capital flows to come. More traditional financial asset advisors and investment platforms will make ETFs available to their clients and their allocations will increase.
The enthusiasm for Bitcoin has spread to other coins as well. The TOTAL3 index, which represents all cryptocurrency assets except Bitcoin and Ethereum, has surged 50% since January 22. In particular, memecoins and AI-related projects are currently leading the way in both spot accumulation and futures speculation, meaning investor interest is diversifying beyond the major cryptocurrencies.
In the macroeconomy, inflation remains rigid. With the PCE index recently reported to have risen in January, we believe the current market expectations of a rate cut in the fourth quarter of this year could change the trajectory, potentially leading to fewer rate cuts. Despite reports that the U.S. saw little growth in new single-family home sales in January, demand for housing remains strong and home prices, a key source of inflation, continue to rise.
Meanwhile, in the cryptocurrency space, Hong Kong is quickly emerging as a cryptocurrency hub, as evidenced by the 22 companies that have applied for licenses to operate cryptocurrency exchanges accessible to retail investors.
This contrasts with the regulatory environment in the United States, where SEC Commissioner Hester Peirce has expressed criticism of the SEC’s current regulatory approach and called for clearer and more definitive rules for classifying digital assets as securities.
While the regulatory wheels continue to slowly turn, overall enthusiasm for cryptocurrency assets remains undiminished.
The total value locked in decentralized finance (DeFi) lending protocols has now soared to over $32 billion. This indicates increased trust and perceived stability in the market as DeFi matures and security and transparency improve. Likewise, household traditional financial firms like Fidelity recommend a 1-3% allocation to cryptocurrencies.
Have a happy trading week!