This week’s on-chain analysis focuses on what we see as key inflection points for the Bitcoin market and where it progresses from here. The recent surge in BTC has seen it hit a significant resistance level at $45,000. This surge represents a more than 170 percent increase from the start of the year, and we could see a complete retracement of the 64 percent downturn experienced in 2022. But the decisions of a key investor cohort – the so-called medium-term investor (holding for 2-3 years) – who make up about 16 percent of the active Bitcoin supply and a significant portion of the market’s realised capitalisation is critical.
On the positive side, the supply of Bitcoin on centralised exchanges has reached a six-year low, marking the 45th consecutive month of diminishing supply. This trend is seen as a bullish sign, indicating a shift towards long-term holding or decentralised custody solutions and a decrease in selling intent. Additionally, the number of BTC deposit transactions to exchanges is at a multi-year low, suggesting reduced selling pressure.
However, the Spent Output Profit Ratio for Bitcoin has remained above one for 44 consecutive days and indicates that a large portion of Bitcoin holders are currently in profit. This is especially the case for long-term holders. This relatively long period of profit-taking raises concerns about the rally being overextended, as similar trends in the past have preceded market corrections.
Recent price movements around the $44,000 to $45,000 levels show an interplay between spot and perpetual markets. The closure of short positions in perpetual markets has helped propel the price upwards, though the market faces volatility and potential corrections at these higher levels. Overall, while the current market shows signs of upward potential, investors should be cautious of possible consolidations or pullbacks.
The current US economic landscape continues to be mixed, albeit we believe rate cutting is over for now, with a cooling labour market and consumer credit growth contrasting with improvements in productivity and a slight uptick in employment.
October marked a notable downturn in US job openings, reaching the lowest in over two and a half years. This decline, part of a trend observed since early last year, suggests a cooling in labour demand, largely attributed to the impact of rising interest rates.
A slowdown in credit growth is also indicative of tighter lending standards and the influence of higher interest rates, pointing towards more cautious consumer spending and borrowing. Meanwhile, the number of Americans applying for unemployment benefits remained stable with only a slight increase, indicating a low number of layoffs despite the slowdown in hiring rates. The Federal Reserve now faces the challenge of balancing further rate hikes with the need for economic stability.
In recent crypto news, Hive Digital Technologies announced a successful investment in Bitmain mining rigs, with returns already realised due to the recent surge in Bitcoin’s value.
El Salvador has launched its “Freedom VISA,” targeting Bitcoin and crypto millionaires. This program requires a $1 million investment in BTC or USDt, offering long-term residency and potential citizenship. Japan’s ruling coalition is also looking more crypto-friendly and is considering a tax reform that would exempt companies from taxes on unrealised gains from long-term cryptocurrency holdings.
Meanwhile, in the United States, a bipartisan group of Senators has introduced the Terrorism Financing Prevention Act. Aimed at curbing the use of digital assets for funding terrorist activities, this proposed legislation would empower the US Treasury to block transactions with sanctioned entities involved in digital asset transactions. This bill represents a significant step in integrating digital currencies into existing financial regulatory frameworks.
Have a good trading week!
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