After having months in complete decline, the cryptographic market has been characterized in this first month of the year 2023 by showing rebounds, achieving a significant recovery for the ecosystem. Bitfinex Alpha, once again makes its weekly report, this time, from On-Chain indicators, a tour of some sectors of the ecosystem that have been affected by this change in trend will be made.
The crypto market has shown a behavior that differs completely from the equity market. For its part, Bitcoin is above USD 23,000, however, the open interest of the USD and USDT pairs has completely fallen in futures markets.
The first recovery of Bitcoin that positively impacted the entire market occurred on January 14 when the price of the cryptocurrency exceeded twenty thousand dollars, an issue that had not been seen since November 2022. This resulted in the complete collapse of the open interest of the USD and USDT pairs, thus placing their price between USD 20,000 and USD 21,500.
However, this was not all, because the traditional markets closed over the weekend and that was when Bitcoin came to be valued above USD 23,000, managing to overcome almost 50% of what were the bearish minimums of the market at which It arrived in the year 2022.
After this time range in which Bitcoin reaches new levels and therefore is located in a totally bullish moment, it was when the open interest of the USD and USDT futures fell. Despite this, when it comes to BUSD, its open interest has remained strong even though it has fallen further on a percentage level during the same move.
“This phenomenon and the number of short liquidations (data covered in the latest edition of Bitfinex Alpha) along with net short closings (figure below) have complemented the rally.” Bitfinex Alpha detailed in its report.
In the Bitfinex Alpha report of Last week the issue of net liquidity was addressed, which was presented in a characteristically low state. This behavior this week remains the same, and a small group of traders have been able to drastically move prices higher due to the decline in market depth.
“Short closings and liquidations have driven the rally more than organic demand. Net short positions on Bitfinex are down 76.4% since the beginning of the year. In fact, due to poor liquidity, altcoin short slippages are at all-time highs. All this data boils down to one piece of information, market sentiment is bearish, especially for retail traders.” explained Bitfinex Alpha.
While this doesn’t exactly make a good impression, retail traders, or otherwise known as Bitcoin “shrimps,” are the last link in completing any Bitcoin derivatives move. The tight futures liquidity has caused whales to continue to add to spot positions. “Questionable weather surrounding the current rally is eased by spot demand.” mentioned Bitfinex Alpha.
Every situation has two sides, on the positive side we are once again seeing accumulations of whales in the spot market. It should be remembered that these large investors do not take risks unless the increases are not around 50% and/or 80%. It is worth remembering that, last year for several months, there were various cases of accumulation of whales that Bitfinex Alpha covered.
In the midst of this bullish situation, massive leverage and/or volume of derivatives as the price continues to rise, are tendencies that are preferred to see out of the game. While they will be part of the process, especially as you enter the “bull mania” phase, you don’t want these trends to get to excessive points. “When the price rises without excessive leverage, driven primarily by spot purchases, the move is likely to sustain in the near term.” was mentioned in the Bitfinex Alpha report.
In the last two months of last year, the accumulation of Bitcoin was directly subject to large wallets., that is, which will store >1M$. During November the FTX collapse occurred, so these big tenors benefited by absorbing the supply that arose from the crash, as well as “the plethora of other bearish events.”
As of the second week of this first month of the year, portfolios containing between USD 1,000 and USD 10,000 have been in rally action. Which means then that small investors are joining the Bitcoin rally while large investors continue in their spot position.
“The capitulation of the miners that had driven the shares of the miners to an 80 percent reduction, which led to the insolvency of several of them, has finally cooled down,” Bitfinex Alpha said.
During these last three years the mining market has reached its lowest points, weekly it is not possible to sell more than 100 BTC. Which positions them in a situation, possibly, of strong buying pressure.
Bitcoin mining has been one of the sectors of the crypto ecosystem that has also gone through a crisis lately, last year it reached a point where miners were mining less Bitcoin than they were selling. At the end of 2022 the numbers of the balances of the miners in the exchanges skyrocketed, currently these amounts are lower than those registered in 2020 and 2021. Which means that the selling pressure is decreasing.
The answer to all of this lies in “Bitcoin hash rate and hash tapes.” Well, they are the ones that show the work that the miners do with the ultimate goal of increasing profitability and the amount of mining equipment on.
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