Sun. May 19th, 2024

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Bitfinex Alpha | Bitcoin Miners Are Pressuring BTC

In this week’s on-chain report, we identify that much of the recent price falls in Bitcoin, particularly following the approval of spot Bitcoin ETFs by the SEC, can be attributed to selling by Bitcoin miners, who used the run-up in BTC as a catalyst to exit, or leverage, their positions. 

Miners in particular are minded to sell given this year’s upcoming halving, which will see BTC rewards reduce and hence miner profitability. Selling now provides the capital for miners to upgrade infrastructure and is a reminder of the significant influence on market liquidity and price discovery that miners have. Miner reserves of BTC dropped significantly shortly after the ETF approvals, and last week again saw the largest outflows from miner wallets ever recorded – suggesting that more selling could be imminent.

All that said, despite even some movement of older coins recently, a majority of the Bitcoin supply has remained dormant, indicating that long-term holders are steadfast

However, in our view, it is important to watch a variety of on-chain indicators to forecast market price. The Value Days Destroyed metric, for example, has spiked, indicating a period of significant coin movements by relatively newer holders (1-2 year category) that historically has preceded a potential market top. But, Entity-Adjusted Liveliness remains near multi-year lows, reinforcing the narrative of a market with resilient investors.

In the broader economy, the Federal Reserve’s recent decision to maintain the policy rate between 5.25 and 5.5 percent, paired with continued quantitative tightening, mirrors the need to balance the thriving pulse of the economy—marked by a robust labour market and soaring consumer confidence—against the lurking risks of inflation.

The US labour market, in particular, displays exceptional vigour, defying expectations with a significant rise in job openings. This resilience, further bolstered by an upward revision of figures for the previous months, underscores a labour market too robust for the Federal Reserve to consider interest rate cuts in this quarter we believe. This sentiment is echoed by the surge in consumer confidence reported by the Conference Board, hitting a peak not seen since December 2021 and reflecting the positive mood in the economy.

Yet, within this positivity, a shift is evident. The Employment Cost Index’s slowest pace of growth since June 2021 signals a moderation in labour costs, offering a beacon of relief amidst inflationary concerns. This moderation is to be encouraged and supports the Federal Reserve’s decision to hold interest rates steady, while if sustained will reinforce confidence that inflation is gradually easing.

In the latest news from the crypto sphere, Bitfinex Securities recently marked its entry into the El Salvador market, establishing itself as the first registered and licensed provider of digital asset services in the country. Endorsed by El Salvador’s National Commission for Digital Assets, the launch reinforces the nation’s commitment to nurturing a Bitcoin-driven economic framework. 

It was also announced this week that Tether had launched Tether Edu to address the growing need for digital literacy and skills, with a particular focus on emerging markets. This program is in sync with Tether’s vision of promoting economic empowerment through blockchain technology and stablecoin awareness. Tether Edu seeks to pave the way for informed and responsible participation in the digital economy, ensuring that the benefits of digital assets are accessible to a broader demographic.

It was also revealed this week that US authorities charged three individuals allegedly connected to a sophisticated $400 million theft from FTX’s digital wallets, shortly after the company declared bankruptcy; and lastly, Genesis Global settled a securities lawsuit with the SEC, agreeing to a $21 million penalty related to its Gemini Earn program. This settlement is indicative of the ongoing rigorous regulatory scrutiny faced by crypto firms in the US., and is part of a wider initiative to ensure compliance and stability in the crypto market. 

This trend towards greater regulation and oversight is reflective of the industry’s maturation and the collective effort to establish a secure, regulated, and trustworthy digital asset environment

Happy Trading!

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By umair

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