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Bitcoin at Crossroads Post-Halving, Bitfinex Analysts Report

Published May 7, 2024 12:23 PM
Teuta Franjkovic
Published May 7, 2024 12:23 PM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • Bitfinex analysts say Bitcoin volatility decreases post-halving but remains uncertain.
  • Increased whale activity on exchanges could indicate plans to sell, creating downward pressure on Bitcoin’s price.
  • The Fed’s rate strategy, inflation, and a slowing labor market contribute to a cautious outlook within the crypto market.

After the recent Bitcoin halving event, the cryptocurrency’s implied volatility saw a notable decrease, suggesting a stabilization in price movements, according to Bitfinex analysts.

However, the past week has witnessed a return of price fluctuations. Traders are adjusting to the new supply dynamics against a backdrop of complex macroeconomic conditions.

BTC Whales Move Holdings to Exchanges – Potential Selling Pressure?

A significant development last week was the movement of substantial Bitcoin holdings by large investors, or ‘whales’, onto exchanges. This action typically signals potential selling pressure, hinting that these investors might be considering selling their holdings.

Despite this, the market appears to have found a temporary price floor. Short-term sellers seem to be stabilizing around current price levels. The lower implied volatility further supports the notion that Bitcoin’s price has found some temporary stability.

Crypto exchange Bitfinex provided insights  to CCN regarding the Bitcoin market’s dynamics following the halving. They noted that traders were still finding a new price equilibrium, adapting to the reduced rate of BTC supply from mining while also considering the impact of complex macroeconomic indicators like inflation and interest rates.

BTC-USD daily chart
Credit: Bitfinex

Recently, Bitcoin experienced a significant drop to a new local low, followed by a sharp correction, and market sentiment has fluctuated over the past week. Despite these fluctuations in Bitcoin, major altcoins have maintained stability, staying above their lows from April.

Bitfinex stated:

“Last week proved to be BTC’s most tumultuous period since November 2022, recording the steepest pullback for this entire cycle with BTC dropping 23 percent below its current cycle high (which is also the BTC all-time high) to form a local low around $56,700. The current move now surpasses the September 2023 correction for this cycle which was a 21.7 percent decline.”

Bitcoin Volatility Declines Post-Halving, Risk Premium Narrows

A notable observation is the increased activity among Bitcoin whales, as indicated by the Exchange Whale Ratio . This activity suggests potential selling pressure since these large investors have been moving Bitcoin onto exchanges, potentially preparing to sell.

Historically, says Bitfinex, aggressive selling in the Bitcoin market has predominantly come from short-term holders—those who have owned BTC for less than 155 days. For this group, the realized price of $58,700 appears to be acting as a critical support level.

The post-halving period has also seen a decrease in Bitcoin’s volatility. Implied volatility has dropped significantly, indicating that the market is settling and the expectations of drastic price movements are diminishing.

Both Bitcoin and Ethereum have seen their volatility risk premiums narrow significantly, which points to a realignment of market expectations towards a more stable and predictable environment. This trend suggests a maturing of the market as it adjusts to the new norms post-halving.

Fed Policy and Wage Pressures Shape Crypto Market Sentiment

The current economic conditions, according to  Bitfinex, continue to be characterized by the Federal Reserve’s cautious approach, maintaining interest rates between 5.25% and 5.5% while also decelerating the reduction of assets on its balance sheet.

This strategy has increased demand for treasuries. Despite this, inflation remains persistent, partly driven by higher wages due to the tight labor market. The latest employment cost index indicates a faster-than-expected rise in wages, yet the availability of jobs has not kept pace, leading to decreased consumer confidence in the labor market. A recent report from the Bureau of Labor Statistics  further underscores this with a drop in job openings to a three-year low and a slowdown in wage growth.

Federal Reserve assets
Credit: Bitfinex

BitFinex looked back on the last week events as well. Binance’s founder, Changpeng Zhao, received a four-month sentence for charges related to money laundering and sanctions violations. Meanwhile, in Hong Kong, the launch of new spot Bitcoin ETFs marks a significant development in the region’s embrace of cryptocurrency, although initial uptake has been gradual.

The exchange stressed that regarding other financial news from the crypto sector, interesting was that Tether, the world’s largest stablecoin issuer, reported a remarkable $4.52 billion profit for the first quarter of 2024. It also disclosed a net equity of $11.37 billion, showcasing its strong financial standing amidst the fluctuating crypto market conditions.

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