Bitfinex Alpha | Bitcoin Prospects Positive, but Geopolitical Risk a Danger

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Bitfinex Alpha | Bitcoin Prospects Positive, but Geopolitical Risk a Danger

In this new post 4th halving era for Bitcoin, on-chain dynamics are decidedly positive. Current on-chain data indicates that Bitcoin exchange outflows are reaching peaks not seen since January 2023, suggesting that many investors are moving their holdings to cold storage in anticipation of price increases. Meanwhile, the active selling by long-term holders has not precipitated the typical pre-halving price drop yet, indicating a robust absorption of this selling pressure by new market entrants.

Miners, too, are adjusting strategies in response to the reduced block reward. There’s been a notable decrease in the BTC sent to exchanges by miners, suggesting pre-emptive selling or collateralisation of holdings to upgrade infrastructure started some months ago, spreading potential selling pressure over a more extended period rather than causing a market shock at halving.

The reduced daily issuance rate of Bitcoin post-halving, estimated to add between $30 to $40 million worth of supply per day, contrasts sharply with the $150 million average daily net inflow from spot Bitcoin ETFs we have seen, underscoring a significant supply-demand imbalance that could foster further price appreciation. That said, as we navigate a risky geopolitical situation, the market’s response will provide critical insights into the long-term viability and valuation of Bitcoin as “digital gold.”

Further the large amounts of buying from spot Bitcoin ETFs, which have been the dominant narrative for the year so far, could still subside and indeed, outflows from ETFs have been seen in the past week, which suggests that ETF demand may begin to stabilise.

The current economic landscape in the United States is also now becoming marked by a complex interplay of international and domestic factors that are shaping the dynamics of the market. The ongoing tensions in the Middle East have escalated concerns in the global markets, particularly influencing oil prices, but which could affect various sectors of the economy depending on future geopolitical developments and subsequent policy responses.

Amidst this backdrop however, American consumer behaviour remains resilient. The latest retail sales data from March shows sustained consumer spending supported by strong job growth despite rising consumer prices. This robust economic activity combined with the recent uptick in inflation, are influencing the Federal Reserve’s monetary policy, with expectations now leaning towards a postponement of interest rate cuts possibly until September.

In contrast to this buoyant consumer spending, the housing sector is facing challenges. Recent reports indicate a downturn in construction, largely attributable to the increased cost of borrowing. This is underscored by a decline in existing home sales, which fell significantly in March. 

On the industrial front, the picture is more encouraging. Industrial production increased in March, marking the second consecutive month of gains after a significant drop in January. This sector appears to be more resilient to the economic pressures of tighter monetary policy, with the industrial production index maintaining levels near record highs over the past eighteen months.

In recent developments within the cryptocurrency industry,  the US Inland Revenue Service has taken a notable step by introducing a draft of Form 1099-DA, designed to enhance the reporting of digital asset transactions. This move is part of broader proposed regulations aimed at standardising crypto brokerage services to align more closely with traditional financial brokers. 

Parallel to these regulatory advancements, public interest in cryptocurrencies continues to surge. Recent data highlighting Google searches for “Bitcoin halving” have reached new heights, eclipsing interest levels previously seen in May 2020.

And finally, Tether, the world’s largest stablecoin issuer, announced the launch of four new business divisions—Data, Finance, Power, and Education. This expansion is aimed at leveraging technology to build inclusive infrastructure solutions that not only challenge traditional systems but also promote financial empowerment globally. 

Happy Trading!

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