Bitfinex Alpha | ETF Flows to Continue while Speculation Increases in Dog, Cat & AI Tokens

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Bitcoin has recorded yet another All-Time High, reaching $72,007 on March 11th (at the time of writing) – a cause for celebration for long-term long-only investors, but challenging for short-term traders and risk-takers. Such sharp moves in the market have resulted in significant liquidations for long and short positioned traders. Last week alone, on March 5th when BTC reached a new high, the reversal that followed as prices retraced led to nearly $900 million in long liquidations, the highest for a single day in three years.

Underlying spot demand for BTC, however, remains strong, as evidenced by continued substantial inflows into the spot Bitcoin ETFs. Despite the volatility on March 5th, the same day saw the highest amount of ETF inflows so far in March, indicating continued robust investor interest.

The altcoin sector is also witnessing a significant resurgence, with the Total3 index climbing to over $720 billion in terms of market cap. This uptick reflects a broadening interest in alternative cryptocurrencies, with a particular – and puzzling focus – on Meme coins, as well as AI-related projects. The AI sector, especially, has seen an explosion of interest and development, with new projects being launched and existing ones expanding, highlighting the potential for synergies between AI and blockchain.

Speculation has also flooded into dog and even cat-themed tokens, and has spilled over into increased trading volume of tokens on the Solana blockchain – which some of the Meme tokens are built on –  reaching levels close to that of Ethereum. On Ethereum itself, heightened trading activity of DEX tokens has led to a sharp increase in transaction fees, which are now on track to achieve an annualised $10 billion of revenue for the first time since early 2022. The spike in interest and the elevated levels of trading that we are seeing in Meme tokens is remarkable, to say the least. 

In the broader macro economy, there was a deceleration in the growth of the services industry, balanced however, by a significant uptick in new orders. Inflation shows signs of easing as the price index for business inputs has dropped from a recent peak. Despite this, the labour market remains robust, with job openings holding steady, and continuing to challenge the Federal Reserve’s goals to cool the market and consider rate reductions. 

The latest employment figures show the US economy added an impressive 275,000 jobs in February, a testament to the enduring demand for labour. Nevertheless, there are indications that the labour market might be starting to cool off, with the unemployment rate seeing a slight uptick, alongside a deceleration in wage growth.

In crypto news last week,  South Korea’s Bitcoin market witnessed a notable increase in the Kimchi Premium, now at a 27-month high, while El Salvador’s investment in Bitcoin has also borne fruit, with the country’s holdings now valued at over $150 million, securing a profit of $50 million. This marks a significant milestone for the nation, which has adopted Bitcoin as legal tender.

On the regulatory front, the United States Securities and Exchange Commission has decided to delay its verdict on the authorisation for the Chicago Board Options Exchange and other trading platforms to list and trade options on Bitcoin ETFs until late April. Finally, in a significant legal advancement, the state of Wyoming in the US has passed legislation granting legal status to Decentralised Autonomous Organizations (DAOs), marking a major step in integrating blockchain initiatives into formal legal structures.

Have a good trading week!

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