February 19th Bitfinex Alpha | BTC Bulls remain valid.
On Bitfinex Alpha
Bitcoin showed how resilient it is this week as flows into Bitcoin spot ETFs continued despite higher-than-expected CPI and PPI data.
BTC is at $52,700, up 25% since the beginning of the year and 207% from its November 2022 low. This left BTC 28.6% below its all-time high, creating tight supply and increasing demand even at higher price levels.
In addition to the continued inflows into Bitcoin spot ETFs, we can see that the short squeeze rate this year has been lower than in previous years. We assume there are two different factors at play here. First, large whale investors have not taken significant short positions due to expectations that prices will continue to rise. Second, it has committed more resources to the spot market, preferring direct investments in BTC rather than derivatives.
Analysis of current supply distribution shows that only 11% of total supply is in the red, and when measured by company, 6% of long-term holders are in the red. Historically, this distribution of supply has been a harbinger of early bull market conditions.
Continued inflation across the economy and lower consumer spending have pushed expectations of a rate cut into May or even June.
However, consumer spending is expected to remain resilient even after the slowdown, thanks to a clear trend of inflation slowing over time and a resilient labor market. Moreover, the U.S. housing market is showing signs of optimism, with homebuilder confidence growing for the third straight month.
Across the cryptocurrency world, we continue to see regulators and financial institutions around the world making significant progress to protect consumers and unlock the transformative potential of digital currencies. The UK Financial Conduct Authority has been at the forefront of consumer protection, issuing more than 2,285 warnings last year to combat cryptocurrency promotions by unlicensed providers.
Vigilance against illegal cryptocurrency activity has also increased significantly in South Korea, with suspicious cryptocurrency transactions surging 48.8% in 2023. In response, the Financial Intelligence Unit (FIU) is developing a system designed to stop suspicious transactions while investigations are ongoing. This reflects the global trend of stricter supervision of cryptocurrency markets.
However, in the United States, Federal Reserve Governor Christopher Waller emphasized that US dollar-pegged stablecoins, which are expanding with the growth of decentralized finance and playing a pivotal role in cryptocurrency trading, are strengthening the hegemony of the US dollar. Although synthetic by design, the use of dollar-backed stablecoins only serves to strengthen dollar demand.
In addition to explaining how cryptocurrency and blockchain can power innovation, Citibank announced a successful proof of concept exploring tokenization in private equity. This move not only demonstrates the practical application of blockchain technology beyond traditional cryptocurrencies, but also signals the growing interest of major financial institutions in the digital transformation of asset management.
Have a happy trading week!