January 15th Bitfinex Alpha | BTC volatility will likely increase further as the market still tends to pull back.
On Bitfinex Alpha
Following the approval of the Bitcoin ETF, the sell-off seen late last week was a direct result of short-term holders realizing significant profits relative to the average realized purchase price of approximately $38,000.
We remain of the view that the market is still likely to see a correction and decline early this year. We note that there was an unprecedented ‘cash’ transfer of BTC to exchanges just prior to the sale.
However, despite this selling pressure, there are a number of factors that continue to support the Bitcoin price. First, there has been a significant increase in ERC-20 stablecoins on exchanges, a sign of increased market speculation and investor confidence. Historically, the expansion of stablecoins has led to increased purchases.
Second, the Bitcoin CME futures contract continues to see high levels of open interest, reaching a year-high just before the ETF approval was announced and remaining high following the event. This suggests that sophisticated investor interest in BTC continues, albeit through derivatives rather than direct holdings.
The third foundation is that long-term holders hold firm in their positions, highlighting a market that is both resilient and vulnerable to short-term volatility.
In the macro environment, consumer prices rose more than expected in December, mainly due to increased rental costs. However, strong job creation and real wage growth continue, with wages growing faster than inflation.
We continue to emphasize the balancing act the Fed must work to promote growth while controlling inflation. Interest rate cuts planned for 2024 are intended to support the economy but must be carefully calibrated to avoid reigniting inflation.
However, current market expectations are positive. Most people, like us, expect the Fed to cut interest rates, especially as more than $3 trillion in corporate debt accumulated at low interest rates during the pandemic will face higher interest rates in 2025. The Fed will do its best to avoid doing that. Place excessive burden on corporate growth. Moreover, the Tax Cuts and Jobs Act of 2017 expires at the end of 2025, creating a need for monetary policy adjustments.
In this scenario, the Treasury yield curve will no longer invert and will shift back to a more traditional structure and renewed optimism.
Additionally, investors have begun to shift assets from money market funds to long-term government bonds and private equity funds, reflecting their appetite for risk. At the same time, the Fed is considering a gradual reduction in its asset portfolio to maintain market liquidity and efficiency.
On the news side, we’ve made significant progress. First, the SEC faced a security breach at account ‘X’, which led to the unauthorized release of a Bitcoin ETF, which temporarily sent BTC prices tumbling and sparked widespread discussion about cybersecurity vulnerabilities within financial regulators. .
ETF approval is now official. We look forward to significantly expanding the Bitcoin investor base, sparking new enthusiasm among investors and market participants.
The impact of this approval was evident in market dynamics. Following the SEC’s approval, the BTC price soared, reflecting the market’s positive reaction to this development. The first day of trading for 11 new spot Bitcoin ETFs hit an astonishing $4.6 billion in trading volume, highlighting the high investor interest and potential growth trajectory for these financial instruments.
Bitfinex Alpha We salute this landmark achievement and remain positive about BTC’s future prospects. Although it remains vulnerable to a near-term downturn. Happy trading!