06 May Bitfinex Alpha | BTC tumultuous but volatility easing
In Bitcoin markets we continue to see traders seeking a price equilibrium, as they adjust to the new rate of supply of BTC on the market from mining and absorb the increasingly complex messages about inflation and interest rates from macro economic indicators.
BTC last week fell to a new local low, before sharply correcting, and in the past week has experienced fluctuating market sentiment, even though major altcoins remained stable above their April lows.
A key development was the observed activity among Bitcoin whales, as indicated by the Exchange Whale Ratio, which suggests potential selling pressure as this cohort of investor has been seen putting Bitcoin onto exchanges, with the possibility that they might be about to sell. That said, historically, most of the aggressive selling has come from the more price-sensitive short-term holders, that is those who have owned BTC for 155 days or less. For this group, the realised price is $58,700, and in current markets this seems to be acting as an important support level. Judging from the short-term holder Market Value to Realised Value ratio, selling seems to be waning.
Further support can also be seen in the fact that this post halving period has resulted in a notable decrease in volatility. The significant drop in Bitcoin’s implied volatility suggests the market is settling, with a reduced expectation of drastic price movements. The volatility risk premiums for both Bitcoin and Ethereum have narrowed dramatically, indicating a realignment of market expectations towards a more stable and predictable environment.
This comes as the current economic landscape means the Fed continues with its cautious and deliberate approach, maintaining rates at 5.25-5.50 percent, and now also slowing down the pace of reduction of assets on its balance sheet, and hence increase demand for treasuries.
Inflation remains persistent with the latest data from the employment cost index rising faster than expected, as the tightness in the labour market means employees can demand higher wages due to inflation. The availability of jobs however has not correspondingly risen, which has caused consumer confidence, regarding the labour market, to dip.
Indeed, supporting this was a Bureau of Labor Statistics report showing a drop in job openings to their lowest level in three years and a deceleration in wages.
In crypto news last week Binance founder Changpeng Zhao was sentenced to four months for money laundering and sanctions violations; and Hong Kong witnessed the debut of new spot Bitcoin ETFs, marking a significant step forward in the region’s adoption of crypto assets, even if the initial take up was slow.
And finally Tether, the world’s largest stablecoin issuer, reported a record $4.52 billion profit in the first quarter of 2024, and revealed net equity of $11.37 billion, reflecting its robust financial position.
Have a good trading week.
