April 29 Bitfinex Alpha | As Interest in Alts Spreads, Opportunities to Buy Bitcoin Appear
On Bitfinex Alpha
Currently, two important Bitcoin on-chain indicators indicate potentially lucrative buying opportunities. The market value to realized value (MVRV) measure, along with the open interest (OI) weighted funding ratio, suggests a potential entry point for investors. The OI-weighted funding ratio was positive last week, indicating an increased preference for long positions. Moreover, the MVRV ratio, currently at 2.21, suggests that Bitcoin may be undervalued. This is because historical patterns show significant returns, especially when MVRV falls below its 90-day average.
However, interestingly, Bitcoin dominance is decreasing, with Ether and other altcoins outperforming BTC. Typically, in the post-halving period, investor focus shifts to altcoins, seeking potentially higher returns. Ether’s recent strong performance against Bitcoin despite regulatory issues suggests the market is embracing altcoins and represents a larger trend shift. Ether’s role as an indicator of altcoin performance remains important. This is because they often outpace broader altcoin market movements.
This potential buying opportunity for Bitcoin and renewed interest in alts comes as the U.S. economy is reported to have slowed to 1.6% growth during the first quarter of the year, lower than the Federal Reserve’s estimate of long-term potential growth of 1.8%. The slowdown comes as the economy continues to labor under persistently high inflation and presents complex challenges for central banks. The Personal Consumption Expenditures (PCE) index, the Federal Reserve’s main inflation indicator, remained unchanged in March, maintaining a 0.3% increase compared to the previous month. However, year-over-year, PCE was 2.7%, exceeding the Fed’s 2% inflation target and exceeding consensus forecasts.
The combination of slowing growth and accelerating inflation is reigniting concerns about stagflation, a scenario in which economic growth stagnates as prices continue to rise. However, some economic resilience is evident through the strong spending patterns recorded in March. But this has been overshadowed by concerns about persistent inflation and the possibility of further interest rate hikes by the Federal Reserve. Market sentiment, once buoyed by positive economic data, is now cautious.
As market expectations adjust to expect fewer interest rate cuts in 2024, the prevailing scenario of longer-term higher interest rates poses serious challenges for U.S. businesses, particularly impacting their ability to finance growth and day-to-day operations.
In this environment, companies are likely to be more cautious, prioritize expansion projects more carefully, hire selectively, and improve operational efficiency.
The U.S. Department of Justice is also taking a firm stance against regulatory violations, recommending that Binance founder Changpeng Zhao be sentenced to three years in prison for violating the Bank Secrecy Act.
Additionally, a lawsuit was launched against Samourai Wallet founders Keonne Rodriguez and William Lonergan Hill, accusing them of facilitating the laundering of more than $100 million through the cryptocurrency mixing service Samourai.
More positively, the IMF study highlighted Bitcoin’s important role in facilitating cross-border financial activities, especially in regions with limited access to the global financial system. The study highlighted the contrast between high Bitcoin adoption rates in countries such as Venezuela and Ukraine and relatively low Bitcoin adoption rates in the United States, highlighting Bitcoin’s utility in financially constrained environments.
Have a great trading week!