September 25th Bitfinex Alpha | The market remains stable with top sales.
On Bitfinex Alpha
This week we evaluate the state of the Bitcoin market and market sentiment by analyzing various on-chain indicators.
Seller fatigue is widespread among short-term Bitcoin holders, as evidenced by the Spent Output Profit Ratio (SOPR) indicator, which appears to have peaked and shifted sales in this group. This suggests that acquiring Bitcoin at these levels may be prudent.
In contrast, long-term holder dynamics are less dynamic. This is because the group has long expressed confidence in the asset and continues to serve as an anchor for the BTC price. The Net Unrealized Profit/Loss (NUPL) indicator also reflects this view for both short-term and long-term holders. The latter mainly moves coins at a profit, while the former incurs a loss. However, the market appears to have found its footing, with Bitcoin’s value remaining relatively stable over the past few months (despite positive long-term holder spend-output-profit ratios).
In other words, intraday volatility is increasing. Last week, the perpetual futures market liquidated over $44 million worth of BTC contracts as the price rose above $1,000. Most of these are expected to be long-term liquidations due to falling markets, but these movements are assessed to have been exacerbated by very low spot trading volumes.
Options trading indicators also reinforce this explanation. Implied volatility is currently outpacing historical volatility, a whopping $3 billion worth of options are set to expire at the end of the month, and the next two weekly expirations currently show very little open interest.
While BTC markets are experiencing declining volume and increasing volatility, the broader economy is also grappling with its future direction. While the Federal Reserve has kept interest rates on hold to plan for a soft landing, some sectors have expressed confidence that this may not be easily achieved. Homebuilders are increasingly uncertain about demand as the NAHB/Wells Fargo index fell in September to its lowest point since April. The downturn, triggered by soaring mortgage rates, also led to the steepest slump in housing starts in three years. But optimistically, building permits surged in August, suggesting there is some demand for new homes.
But interest rates are not expected to fall anytime soon and U.S. companies acknowledge that economic conditions will be difficult, with only very slow growth reported in September. The services sector is currently moving at its slowest pace since February, with new orders falling noticeably.
It’s encouraging to see that last week’s news cycle in the cryptocurrency space was largely positive. Tether announced an investment in Northern Data Group, a German company providing data center, cloud, AI computing, and blockchain services while continuing to support innovative technologies. At the same time, Google Cloud announced the addition of 11 blockchain networks to its BigQuery service, giving it a total of 19 networks from which it can collect and serve data. Also in the DeFi space, PancakeSwap announced a partnership with Transak to add more fiat onramp solutions. CoinShares has expanded its hedge fund division on U.S. shores to provide cryptocurrency portfolio solutions to American accredited investors.
Happy trading!