May 13 Bitfinex Alpha | Despite Recent Price Drop, Bitcoin Has Never Looked Stronger
The fundamental strength of Bitcoin remains unwavering. As the network celebrated its billionth transaction Last week we were reminded that aside from all the attributes Bitcoin has as a store of value and a hedge against monetary policy inflation, it also remains a quick and cheap way to transfer assets from peer to peer. -to-peer, without intermediaries. banks or governments must act as a centralized authority.
However, last week Bitcoin fell under selling pressure and its price dropped from around $65,000 earlier in the week to $60,000. The source of the selling appears to be primarily from short-term holders (held for 155 days or less), but they have not been joined by long-term investors. Indeed, the distribution of long-term holders previously observed in April appears to have declined, and on-chain data noted that they don't seem to be participating in the latest sell-off.
If this trend continues, we may soon conclude that the bottom has already been reached and the growth potential has increased. The recent volatility in daily net flows into US Bitcoin ETFs also suggests that there is mixed investor sentiment, indicating that a short-term bottom for the price has been reached. Last Wednesday, for example, there were zero flows into all but one U.S. Bitcoin ETF; The popular Blackrock ETF saw inflows on Friday, but these were overshadowed by outflows from the Greyscale ETF, GBTC. But on Monday of last week, as well as the previous Friday, all funds, including GBTC, saw positive net collection. This continued ebb and flow of capital into BTC ETFs, with no clear direction one way or the other, supports our view that the bottom may almost be reached.
On the macroeconomic front, we also see the market becoming cautious before a clear direction emerges. The Fed's hawkish approach to inflation has led to a loan crunch and one decline in wholesale inventories in the United States. Contracting inventory levels and borrowing activities imply that companies are preparing for a downturn and adjusting their operational strategies in anticipation of a slowdown in economic conditions.
This cautious sentiment is also reflected in consumer behavior, US consumer confidence fall to its lowest level in six months in May, largely due to heightened concerns about inflation.
Meanwhile, in the land of cryptocurrencies, the US House of Representatives adopted a resolution against the SEC's requirement that banks account for cryptocurrencies held by customers on their balance sheets. While this is seen as a positive development, President Biden opposed the resolution, arguing for the need for regulatory safeguards to ensure the stability and integrity of the crypto industry.
The SEC is also at the center of ongoing litigation it has pursued against Ripple Labs, with the SEC challenging Ripple's defense against allegations of recklessness in its XRP transactions. The SEC argues that it should be able to impose punitive measures against Ripple to deter it from potential future violations – even though Ripple has not recorded any violations of SEC rules since 2020.
Have a good trading week!