29 Apr Bitfinex Alpha | Bitcoin Buying Opportunities Emerge as Interest in Alts Spread
Currently, two important Bitcoin on-chain metrics signal a potentially advantageous buying opportunity. The Market Value to Realised Value (MVRV) measure, alongside the Open Interest (OI) weighted funding rate, hint at a potential entry point for investors. The OI-weighted funding rate went positive last week, indicative of an increased appetite for long positions. Furthermore, the MVRV ratio, currently at 2.21, suggests Bitcoin might be undervalued, especially as historical patterns show substantial returns when MVRV dips below its 90-day average.
Interestingly, however, Bitcoin dominance is experiencing a decline, with Ether and other altcoins outperforming BTC. Typically, post-halving periods witness a shift in investor focus to altcoins, searching for potentially higher returns. Ether’s recent robust performance against Bitcoin, despite regulatory challenges, suggests a market that is receptive to altcoins and indicative of a larger trend shift. Ether’s role as an indicator for altcoin performance remains significant, as it often precedes broader altcoin market movements.
This potential buying opportunity for Bitcoin and the fresh interest in Alts come as the US economy reported growth slowing to 1.6 percent during the first quarter of the year, marking a dip below the Federal Reserve’s long-term potential growth estimate of 1.8 percent for the first time since the second quarter of 2022. This slowdown comes as the economy continues to labour under persistently high inflation, presenting a complex challenge for the central bank. The Fed’s key inflation gauge, the personal consumption expenditures (PCE) index, saw no change in March, holding steady at a 0.3 percent increase month-over-month. However, on a year-on-year basis, PCE is at 2.7 percent – above the Fed’s 2 percent inflation target and exceeding consensus forecasts.
This combination of slowing growth and accelerating inflation has reignited fears of stagflation, a scenario in which economic growth stalls as prices continue to rise. However, some economic resilience is evident, exemplified by robust spending patterns recorded in March, though this has been overshadowed by worries about sustained inflation and potential further rate hikes by the Federal Reserve. Wider market sentiment, once buoyed by positive economic indicators, has now tilted towards caution.
As market expectations adjust to anticipate fewer rate cuts in 2024, the prevailing scenario of higher-for-longer interest rates poses significant challenges for US companies, particularly affecting their financing capabilities for growth and day-to-day operations.
In this climate, companies are likely to exercise increased caution, prioritise their expansion projects more judiciously, hire selectively, and enhance operational efficiency.
The US Department of Justice is also taking a firm stance on regulatory violations, recommending a three-year prison sentence for Binance founder Changpeng Zhao due to breaches of the Bank Secrecy Act.
It has also initiated action against Keonne Rodriguez and William Lonergan Hill, founders of Samourai Wallet, for allegedly facilitating over $100 million in money laundering through their crypto mixing service, Samourai.
More positively, an IMF study has illuminated Bitcoin’s significant role in facilitating cross-border financial activities, particularly in regions where access to the global financial system is constrained. The study highlighted the contrast between high Bitcoin adoption in countries like Venezuela and Ukraine and its relatively low uptake in the United States, underscoring its utility in financially restrictive environments.
Have a good trading week!
