12 Aug Bitfinex Alpha | Bitcoin Experiences This Cycle’s Largest Pullback Before Recovery
in Bitfinex Alpha
Last week, Bitcoin saw a strong recovery, surging almost 28 percent from its recent low near $49,000, which marked the lowest price since February. This rebound brought BTC back above the crucial $60,000 level after it had experienced a significant sell-off in August, with the price dropping 33.32 percent from its cycle high and All-Time High of $73,666. This marked the largest decline of the current cycle.
Key metrics, such as the Mayer Multiple, which compares Bitcoin’s current price to its 200-day moving average (200DMA), provide insight into the severity of this downturn. The Mayer Multiple dropped to 0.88 during the recent decline, a level not seen since the FTX collapse in November 2022, indicating a strong bearish phase as Bitcoin traded significantly below its average historical trend.
On-chain metrics also highlight the intensity of the sell-off. The Short-Term Holder Realised Price (STH Cost-Basis), which reflects the average purchase price of recent buyers, is currently at $64,860. Bitcoin’s spot price recently approached the -1 standard deviation (SD) band below this STH Cost-Basis, a rare occurrence, historically seen in only about 7.1 percent of trading days. This highlights the severity of the current market conditions.
The Short-Term Holder MVRV ratio, which compares the current market price to the purchase price for newer investors, shows that this group is holding the largest unrealised losses since the bear market lows of 2022. Overall, these metrics underline the deep bearish sentiment and stress among short-term investors, which usually occurs at local bottoms.
The US economy continues to display resilience, with recent data offering a more optimistic outlook despite ongoing concerns of a potential slowdown. Last week, a significant drop in jobless claims and a steady rise in wholesale inventories provided a solid foundation for economic growth, particularly in the second quarter, where US wholesale inventories played a crucial role in economic expansion.
Household debt levels in the second quarter edged up slightly, highlighting a growing financial burden on consumers. However, with delinquency rates remaining stable, it is evident that borrowers are still supporting economic activity, albeit with some signs of strain. The slower pace of credit usage and rising financial stress hint at a potential deceleration in consumer spending, which could temper economic growth unless the Federal Reserve considers adjusting interest rates.
Adding to the mixed economic signals, the US services sector experienced a notable rebound in July, recovering from a four-year low as new orders surged and employment within the sector grew for the first time in six months. This resurgence in services may help ease fears of a recession, particularly in light of the recent spike in unemployment and continued stock market volatility.
In the latest news from the crypto-sphere, Kamala Harris has emerged as the frontrunner in the 2024 US presidential race, leading Donald Trump by a narrow margin in both betting odds and recent polls. As her campaign gains momentum, there is growing speculation about her potential stance on cryptocurrency, particularly as her team has begun engaging with industry executives. This engagement hints at the possibility that cryptocurrency policy may become a focus in the coming months, sparking interest and anticipation within the crypto community.
Simultaneously, major financial institutions like BlackRock and Nasdaq are making strides in the digital asset market, as they recently filed a request with the US Securities and Exchange Commission (SEC) to introduce options trading for BlackRock’s spot Ethereum ETF. This move comes on the heels of the SEC’s approval of Ethereum-linked ETFs from several prominent firms, signalling a significant expansion in investment options for digital assets. As these developments unfold, the SEC continues to play a pivotal role in shaping the cryptocurrency landscape, evidenced by its recent decision to delay approval of Hashdex’s proposed ETF, which aims to directly hold spot Bitcoin and Ether. The postponement, extending the review period until September 30, 2024, reflects the SEC’s cautious approach as it meticulously evaluates the implications of new digital asset products on the market.
Have a great trading week!
