Blockchain
Bitcoin (BTC) shows resilience amid macroeconomic uncertainties
Bitcoin (Bitcoin) has demonstrated remarkable resilience in recent weeks, driven by robust spot ETF flows and consistent net inflows, as detailed in Bitfinex Alpha’s latest report. Despite a generally positive trend, stronger-than-expected U.S. jobs data on Friday caused prices to fall, raising concerns about the timing of potential rate cuts.
Market resilience and inflows
According to Bitfinex Alpha, Bitcoin has recorded 20 consecutive trading days of net inflows, supported by strong spot ETF flows. However, the inability to break out of the range highs remains a near-term negative. The market is also showing high opening interest on BTC and altcoin perpetual futures, along with high funding rates, suggesting potential future price corrections due to leveraged positions.
Increased activity among short-term holders
Short-term Bitcoin holders have been increasingly active, with holdings increasing from 2.2 million BTC in January to over 3.4 million BTC in mid-April. This surge, driven primarily by the purchase of spot Bitcoin ETFs, has introduced a degree of sensitivity to price volatility. In contrast, long-term Bitcoin holders show strong market conviction. Recent data indicates a halt in selling in this group, with BTC held for over a year remaining dormant.
Macroeconomic factors affecting cryptocurrencies
Macroeconomic developments continue to impact cryptocurrency prices. Recently released April data on U.S. job opportunities revealed a sharp decline, indicating a slowing economy. However, May employment data contradicted this trend by showing an unexpected increase in labor demand, casting doubt on the likelihood of short-term rate cuts. This discrepancy puts the United States at odds with other central banks, such as the European Central Bank and the Bank of Canada, which began cutting rates last week to boost recovery and growth.
The U.S. services sector also rebounded in May, reversing April’s contraction, with business activity hitting its fastest pace in three years. This resilience complicates the Federal Reserve’s decision-making process, as it balances signs of economic weakness with areas of significant strength.
Potential risks of prolonged high interest rates
While the strength and adaptability of the U.S. economy could allow it to thrive even with high interest rates, driven by strong labor demand and rising wages, there is a risk that sustained high interest rates could stifle activity economical. This could reduce investment and job creation, potentially leading to a recession.
Legal actions and regulatory developments
In other cryptocurrency news, New York Attorney General Letitia James has filed a lawsuit against AWS Mining and NovaTech for allegedly operating cryptocurrency pyramid schemes. These companies and their promoters promised high returns but operated like pyramid and Ponzi schemes, misleading investors. Meanwhile, ProShares has filed with the SEC to list an Ethereum spot ETF on the NYSE, with a decision expected by the end of July 2024. The proposal, which complies with SEC guidelines, excludes Ether staking capabilities, limiting investor return opportunities but aligning with regulatory standards for broader market acceptance.
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