Bitcoin (BTC) has demonstrated notable resilience in recent weeks, driven by robust spot ETF flows and consistent net inflows, as detailed in the latest report from Bitfinex Alpha. Despite a generally positive trend, stronger-than-expected US jobs data on Friday caused a price dent, raising concerns about the timing of potential rate cuts.
Market Resilience and Inflows
According to Bitfinex Alpha, Bitcoin has seen 20 consecutive trading days of net inflows, bolstered by strong spot ETF flows. However, the inability to break past range highs remains a short-term negative factor. The market also shows high open interest on BTC and altcoin perpetual futures, coupled with high funding rates, suggesting potential future price corrections due to leveraged positions.
Increased Activity Among Short-Term Holders
Short-term Bitcoin holders have been increasingly active, with holdings rising from 2.2 million BTC in January to over 3.4 million BTC by mid-April. This surge, primarily driven by the buying of spot Bitcoin ETFs, has introduced a degree of sensitivity to price volatility. In contrast, long-term Bitcoin holders exhibit strong market conviction. Recent data indicates a halt in selling among this cohort, with BTC held for over a year remaining inactive.
Macroeconomic Factors Impacting Crypto
Macroeconomic developments continue to impact crypto asset prices. Newly released April data on US job openings revealed a sharp drop, indicating a slowing economy. However, May employment data contradicted this trend by showing an unexpected surge in labor demand, casting doubt on the likelihood of near-term rate cuts. This discrepancy puts the US at odds with other central banks, such as the European Central Bank and the Bank of Canada, which began cutting rates last week to foster recovery and growth.
The US services sector also rebounded in May, reversing April’s contraction, with business activity reaching its fastest pace in three years. This resilience complicates the Federal Reserve’s decision-making, as they balance signs of economic weakness with areas of significant strength.
Potential Risks of Prolonged High Interest Rates
While the US economy’s strength and adaptability could enable it to thrive even with high interest rates, driven by robust labor demand and rising wages, there is a risk that prolonged high interest rates could stifle economic activity. This might reduce investment and job creation, potentially leading to a downturn.
Legal Actions and Regulatory Developments
In other crypto news, New York Attorney General Letitia James has initiated legal action against AWS Mining and NovaTech for allegedly running crypto pyramid schemes. These companies and their promoters promised high returns but operated as pyramid and Ponzi schemes, misleading investors. Meanwhile, ProShares has filed with the SEC to list a spot Ethereum ETF on the NYSE, with a decision expected by late July 2024. The proposal, which complies with SEC guidelines, excludes Ether staking features, limiting investor yield opportunities but aligning with regulatory standards for broader market acceptance.
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