Bitfinex Alpha | BTC to Rally, but Market Outlook Is Volatile

As we enter into the halving month for Bitcoin, we look at all the past halvings since 2012 and, using a straightforward regression model, predict a 160 percent post-halving price surge in the next 14 months, taking the price to between $150,000-169,000. However, this approach may be too simplistic. The key difference between the 2024 halving and all those that have gone before is that BTC has already reached an All-Time High before the halving has even taken place.  There is now a lot more selling pressure by both Long-Term Holders and Short-Term Holders (STHs), which means there is a more complex calculation to ascertain how high BTC can go.

Indeed, BTC seems to have entered a consolidation phase between $65,000 and $71,000 and is marked by periods of volatility. On-chain analysis reveals that 1.875 million BTC, which constitutes 9.5 percent of the circulating supply, have been purchased at prices above $60,000, of which a significant portion belongs to Short-Term Holders. This group encompasses new spot buyers and the approximate 508,000 BTC currently held in US Spot ETFs (excluding the Grayscale ETF). These buyers have been absorbing the approximately 900,000 BTC (including the Grayscale ETF selling) that Long-Term Holders have released onto the market since December 2023 and bought more, but both cohorts have also been selling, contributing to the range-bound volatility we are currently experiencing.

This distribution highlights the active engagement of STHs at higher price levels, the evolving dynamics of Bitcoin ownership, and the growing influence of institutional investments through spot ETFs. Liveliness among cohorts is close to its cycle high as more entities are moving their coins than ever before in this cycle. This makes for a particularly difficult market to read.

In the broader macro economy, the job market exceeded expectations in March, demonstrating robust growth and wage increases, potentially influencing the Federal Reserve’s interest rate decisions. The unemployment rate dropped. Despite this, markets are becoming increasingly more cautious about the likelihood of a Fed rate cut in June.

Fed Chair Jerome Powell, in a recent speech, acknowledged progress in combating inflation but noted that the mission is far from complete. Highlighting the solid economic growth and job creation, Powell suggested that the policy rate might have reached its peak for this tightening cycle, with potential rate reductions later this year only if the economy evolves as expected.

In crypto news, South Korea plans to implement stricter regulations for cryptocurrency token listings on centralised exchanges, aiming to enhance market security and transparency. 
Hong Kong virtual bank, ZA Bank, is set to offer banking services for stablecoin issuers, while DApp usage and the NFT sector surged in Q1 2024, reflecting the increased interest in Web3 and decentralised applications.

Finally, Australia is on the verge of welcoming its first Bitcoin ETF with Monochrome Asset Management’s application to list its product on Cboe Australia.

Happy Trading!

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