April 1st Bitfinex Alpha | Bitcoin Trades in a Range, but Volatility Continues
On Bitfinex Alpha
After the significant price rally in March, when Bitcoin broke its all-time high (ATH), we believe we are in a range trading period, although we have seen more volatility at similar points in the cycle.
On-chain data shows that long-term holders (LTH) are selling after ATH. Although this is occurring on a smaller scale than was seen at previous bull market peaks, it is resulting in increased volatility as previously dormant supply kicks in. market. It is estimated that over $2.6 billion in profits has been made through on-chain transactions, of which 40% is attributed to the LTH cohort.
However, further analysis using UTXO age bands shows that buying is also occurring, indicating a bottom as new investors come in and existing investors increase their positions in the belief that the market may rise further.
Spot Bitcoin ETFs have also become an important cornerstone of the market. Net inflows into ETFs resumed last week as passive demand continued. At current inflow rates, BTC demand is roughly twice the value of Bitcoin being mined. When you put all of these pricing dynamics together, we believe you’ll see a diverse market in the current environment.
In this market environment, the U.S. economy continues to perform strongly, supported by robust consumer spending, stabilizing inflation, and signs of recovery across many sectors. Personal consumption expenditures (PCE) data in February showed a higher-than-expected increase of 0.8%, but real disposable income fell for the first time in five months as personal income growth slowed. In our view, this will increase pressure on the Fed to begin cutting interest rates to avoid jeopardizing economic growth.
The current economy continues to demonstrate remarkable resilience. Durable goods orders rose 1.4%, with the manufacturing sector appearing to have defied the impact of a tight monetary environment. Home prices are also rising, with the S&P CoreLogic Case-Shiller 20-city home price index recording 6.6% year-over-year growth.
The strength of the U.S. economy was further emphasized when the growth rate for the previous year’s fourth quarter was revised upward to an annualized 3.4%. Moreover, consumer sentiment reached its highest point in nearly three years in March, driven by optimism that inflationary pressures will continue to ease.
The cryptocurrency industry has been navigating turbulent waters in recent months, with a series of legal and regulatory challenges highlighting the heightened scrutiny it is facing globally. In a significant legal development, a New York judge pushed forward the SEC’s lawsuit against Coinbase, while in other markets, Binance’s Russian operations have faced their own regulatory hurdles, leading to the phasing out of its Russian successor, CommEx. Meanwhile, in Africa, Binance is facing a different kind of challenge as Nigeria accuses exchanges of tax evasion. Adding to the industry’s difficulties, KuCoin and its founders have found themselves in the crosshairs of the U.S. Attorney’s Office. Accused of violating bank secrecy laws and operating without the proper licenses, KuCoin’s indictment on charges of laundering more than $5 billion in circumvention of U.S. anti-money laundering regulations represents a serious compliance failure.
Have a happy trading week!