March 25th Bitfinex Alpha | The ETF has medium and regional bottom flows for BTC establishment.
On Bitfinex Alpha
As the market begins to recover after a sharp decline early last week, we have been paying attention to where the bottom of the current trading range is. We believe that Bitcoin’s decline last week after recording a correction of approximately 17.5% from its current all-time high of $73,666 means we are close to setting a local low. In fact, you may have already done so.
Examining the correction patterns we have seen since BTC bottomed in November 2022, corrections typically do not exceed 20-24% and we expect the current cycle to be no different.
We also do not see the state of inflows into spot Bitcoin ETFs as a cause for concern. Despite the significant negative ETF outflows last week, they all came from Grayscale Bitcoin Trust (GBTC). Investors benefit from being spared the high fees GBTC requires, especially since many of these investors are long-term investors. Holders entering a bear market. I would be concerned if GBTC’s negative flows started to be reflected in newer ETFs like Blackrock’s IBIT and Fidelity’s FBTC.
GBTC investors are not the only sellers in the market. Whale wallet activity has also indicated significant profit taking, evidenced by the fact that long-term holders’ SOPR (Spending Output Profit Ratio) is firmly in profit territory. The lack of movement in realized prices for long-term holders shows that this group has not made significant BTC purchases since early February.
According to our analysis, the lowest price of BTC in the current market is around $56,000. This is because it is just above the realized price for the short-term holder group and is also the expected cost basis for ETF investors. A drop to $56,000 would be the largest decline we can expect from new local highs, amounting to around 23-24%. This is consistent with our previous analysis of market bottom corrections.
In the broader macroeconomy, the U.S. housing market is showing signs of improvement, as evidenced by a significant increase in housing starts, which brings hope that we may have a more balanced market and potentially contributes to the burden of shelter inflation, a notable factor. can be alleviated. It’s about broader inflation trends.
The National Association of Realtors reported a significant increase in existing home sales, further strengthening the outlook for the housing sector. However, this positive trend is being counterbalanced by a declining inventory of available homes. The limited supply of existing homes combined with increased new home construction highlights ongoing market pressures on housing and suggests that new homes alone may not be enough to cool the housing market.
But the Fed expects three policy rate cuts this year and has said that despite the recent surge in inflation, a gradual reduction in inflation toward its 2% target remains the central story, albeit on an uneven trajectory.
U.S. business activity has remained stable despite rising input and production costs, further highlighting the Fed’s complex challenges in managing inflation risk and planning for a soft landing.
In the cryptocurrency space, the SEC continues to delay ETF applications for spot ETH products as it intensifies its scrutiny of Ether and questions about whether ETH should be classified as a security. Due to ongoing uncertainty, the discount rate for the Grayscale Ethereum Trust has widened to 20%, the lowest since November 2023.
On the positive side, BlackRock launched BUIDL, the first tokenized asset fund on the Ethereum network. This launch marks a significant milestone in BlackRock’s digital asset strategy. It provides qualified investors with a new way to earn USD returns through blockchain technology and improves the accessibility and transparency of on-chain products.
Have a great trading week!