Bitfinex Alpha | Institutions are back in Bitcoin, with sideways trading expected

30 Oct Bitfinex Alpha | Institutions are back in Bitcoin, with sideways trading expected

Bitcoin’s recent trajectory has been nothing short of meteoric. The cryptocurrency surged past the $35,000 mark, a level it hadn’t seen in 17 months. This ascent triggered the liquidation of a staggering $275 million worth of shorts on October 23rd, the largest since January. 

Institutional involvement in Bitcoin is becoming increasingly evident. CME options volume for Bitcoin is set to close October at a record-breaking high of over $2 billion. At the same time, options open interest are showing signs of rejuvenation, currently pegged at $1.15 billion. This renewed interest in BTC by institutions combined with historical trend data suggests a 60 percent probability that Bitcoin’s upward trend in October will continue into November.

That said, there is a significant amount of selling in the market. As Bitcoin breached $35,000, a substantial cohort of short-term holders decided to cash in on the rally. This profit-taking was the most pronounced since April 11th, 2023. In contrast however, long-term holders have remained largely steadfast, with supply in this cohort reaching an all-time high of 14.899 million BTC. In essence, Bitcoin’s recent performance paints a picture of a market in flux. While short-term holders are seizing the moment to realise profits, long-term investors are showcasing unwavering confidence. The market dynamics suggest that we might be in the early stages of a crypto bull market.

On the macroeconomic front, US new single-family home sales in September saw a significant rise, the largest in 19 months, despite a notable drop in the annual median price. Builders, taking advantage of the shortage of pre-owned homes, are providing discounts. However, with rising mortgage rates and dwindling applications, reduced demand is expected.

Meanwhile, the US is grappling with a burgeoning fiscal challenge as its debt, currently at a staggering $33 trillion, is set to rise. The 2023 budget deficit reached $1.695 trillion, up by 23 percent from the previous year. The debt-to-GDP ratio hit 97 percent in 2022 and is predicted to climb to 107 percent by 2029. Nonetheless, the US economy grew robustly in Q3, with a 4.9 percent GDP growth rate, surpassing forecasts.

This economic resilience can also be seen in the manufacturing sector. After facing five consecutive months of contraction, October brought a rejuvenating rebound for US manufacturing, bolstered by a surge in new orders. The service sector followed suit, with its PMI rising to 50.9—the highest in three months. This economic growth, however, is juxtaposed with inflation concerns. The Personal Consumption Expenditure inflation rate in September came in at 3.44 percent and core inflation is still at four percent, double the Federal Reserve’s long-term target.

In a dynamic crypto landscape, we had a positive news week. It was revealed that JPMorgan’s JPM Coin boasts $1 billion in daily transactions, driven by its corporate and institutional customers. The market was also buoyed by the listing on DTCC of the BlackRock Bitcoin ETF, fueling speculation that SEC approval was imminent – albeit such a listing is standard protocol and does not provide any indication of regulatory action.

Finally, Bitfinex Securities unveiled the capital raise of one of the world’s first tokenised bonds. ALT2611 is due to debut next month, and is raising funds for investment into microfinance opportunities and small and medium sized enterprises in parts of Europe and along the Silk Road.

Have an excellent trading week!