Bitfinex alpha | The market will rebound, but beware of “sell” transactions

January 20th Bitfinex alpha | The market will rebound, but beware of “sell” transactions

Bitcoin made an astounding recovery last week, immersing its lowest price of $89,698, above $100,000. The recovery reached a high of $105,800. This 18.2% peak-to-trough bounce highlights relative strength compared to Bitcoin stocks, with BTC increasing the week by 10%.

BTC/USD 4H chart showing the highest ever last week

The DIP, below $90,000, caused a major liquidation, marking $818 million on January 13th, including a long position of $592 million. Short-term holders (STHs), with an average cost base of $88,400, played a key role in protecting prices during this revision. Historically, the STH cost base has served as a reliable level of support, and last week’s trough closely aligned with this level, causing a rebound. However, if you fall below the STH cost base, it can cause stress and further promote sellouts.

This recovery was driven primarily by aggressive spot purchases, as seen in the sharp rise in the Spot Cumulative Volume Delta. This metric showed significant candidate purchasing pressure, particularly from US-based exchanges. Purchasing patterns reflect previous activities related to micro-strategic and ETF purchases, further strengthening the view that they remain in institutional demand.

However, the spot buying pressure seen last week can take some time for bids to be replenished, and could lead to short pullbacks before the upward momentum resumes. Bitcoin’s resilience and sustained demand are well positioned for its continued strength over the medium term.

Inflation showed a slight increase in December, with CPI rising 2.9% on an annual basis, driven primarily by a surge in energy prices. Core inflation exceeds the Federal Reserve’s 2% target, but stabilizing import prices and growth in the lower than expected producer price index provide optimism to ease inflationary pressures. Consumer spending was strong, with retail sales rising by 3.9% year-on-year in December, strengthened by wage growth and a strong labor market. But uncertainty looms as Trump’s proposed tariffs increase the costs of key commodities, disproportionately affecting low-income households and disrupt recent advances in inflation control. Meanwhile, the Federal Reserve appears cautious, informing them of smaller rate cuts in 2025 to balance inflation concerns with economic growth. Despite these headwinds, the resilience of consumer activity and employment strength provides a solid foundation despite the risks from tariff policies, labor supply constraints, and seasonal spending fluctuations can pose important challenges.

Last week in Crypto News, Trump launched Memecoin$Trump on the Solana blockchain, stirring both enthusiasm and skepticism, which quickly reached a $15 billion valuation, and managed to earn some important benefits. It is sold as a symbol of support for Trump’s ideals rather than investment, but concerns about centralization and transparency have potential impacts on regulatory scrutiny and political funding. In the meantime, institutions continue to look for ways to make crypto-related assets available to traditional financial investors, with filings submitted to Spot Litecoin ETF proposed by Onchain Economy ETF, focusing on digital asset infrastructure. These filings reflect the wider push for mainstream crypto adoption following the success of Bitcoin and Ethereum Spot ETFs. Onchain Economy ETF aims to provide exposure to the companies that shape the blockchain economy, offering investors a diverse entry point amid growing interest in the sector.