20 Jan
Bitfinex Alpha | Markets Rebound but Beware ‘Sell-the-News’ Trading
Bitcoin experienced a remarkable resurgence last week, surging past $100,000 after momentarily dipping to a low of $89,698. The bullish momentum peaked at $105,800, showcasing an 18.2 percent bounce from the low, highlighting Bitcoin’s strength compared to stock markets, as it concluded the week up by 10 percent.
BTC/USD 4-Hour Chart Indicating the Recent All-Time High
The dip below $90,000 prompted significant liquidations, totaling $818 million on January 13th, including $592 million in long positions. Short-term holders (STHs), whose average entry price is $88,400, played an essential role in defending the price during this downturn. Historically, the STH cost basis serves as a sturdy support level, and last week’s low closely matched this parameter, leading to a rebound. Nevertheless, a decline beneath this cost basis could precipitate further selling pressure.
The recovery was largely driven by aggressive spot purchases, evidenced by a notable increase in the Spot Cumulative Volume Delta. This metric indicated heightened taker buy pressure, particularly from exchanges based in the United States. These buying patterns echoed previous trends associated with institutional purchases, such as those by MicroStrategy and ETF acquisitions, reinforcing the notion of sustained institutional demand.
However, the buying pressure from last week may need time to recuperate, potentially leading to a temporary pullback before the price gains additional momentum. Bitcoin’s robustness and ongoing interest position it favorably for continued strength in the medium term.
December witnessed a slight rise in inflation, with the CPI increasing by 2.9 percent year-over-year, primarily driven by spikes in energy prices. While core inflation remains above the Federal Reserve’s target of two percent, stabilizing import prices and lower-than-expected growth in the Producer Price Index lend some optimism regarding moderating inflationary pressures. Consumer spending figures stayed robust, with retail sales surging 3.9 percent year-over-year in December, fueled by wage growth and a strong labor market. Nevertheless, uncertainties still exist as Trump’s proposed tariffs may elevate costs for essential goods, disproportionately affecting lower-income households and potentially hindering recent inflation control efforts. Furthermore, the Federal Reserve seems cautious, hinting at fewer rate cuts in 2025 to manage inflationary pressures alongside economic growth. Despite these challenges, strong consumer activity and labor market resilience provide a solid foundation, even as tariff policies, labor supply issues, and seasonal spending variations present significant risks.
In crypto news, Trump unveiled the meme coin $TRUMP on the Solana blockchain last week, generating excitement and skepticism alike as it swiftly attained a market valuation of $15 billion before experiencing notable profit-taking. Marketed as a representation of support for Trump’s ideals rather than a traditional investment, concerns about its centralization and transparency could attract regulatory scrutiny and raise issues related to political finance. Concurrently, institutions are actively seeking means to integrate crypto assets into traditional finance, having filed for a spot Litecoin ETF and a proposed Onchain Economy ETF focused on digital asset infrastructure. These applications reflect an ongoing commitment to mainstream crypto adoption, following the successful introduction of Bitcoin and Ethereum spot ETFs. The OnChain Economy ETF aims to give investors exposure to companies shaping the blockchain ecosystem, providing a diversified entry point amidst rising interest in the digital asset sector.
