Bitfinex Alpha | Bitcoin ETF Inflows Moderate, but Altcoins Are Not Losing Their Shine

After reaching a new all-time high of $73,666 on March 14th, Bitcoin saw a pullback of over 12.5 percent, in what was one of the largest price dips since the launch of spot Bitcoin ETFs in early January. While Spot Bitcoin ETFs have seen unprecedented inflows, crossing a billion dollars in a single day last week, a recent stabilisation in flows has given the market some pause. It would not be a surprise to see a period now in which the market seeks some equilibrium after the initial enthusiasm we have seen. The flow data from the upcoming week will be crucial in shedding light on TradFi investors’ sentiment towards Bitcoin, and in particular their reaction to the sharp corrections last week.

In contrast, the altcoin market has shown remarkable composure in the face of Bitcoin’s volatility. The Total3 index reached a new cycle high, indicating growing investment flows into alts. This resilience is being reflected in the substantial inflows into Ethereum and other Layer 1 (L1) blockchain projects, despite Ether’s underwhelming performance against BTC.

There is, however, an increasingly bullish narrative for Ether and Ethereum as evidenced by the record outflows of ETH from exchanges, and the burgeoning popularity and valuation of Layer 2 ecosystems like Base, which have seen their total value locked (TVL) double in recent weeks. As we look ahead, the performance of large-cap altcoins, particularly those with their own ecosystems, will be crucial in understanding the market’s direction. 

In the macro world, the Consumer Price Index (CPI) report for February delivered a blow to hopes for an early easing of monetary policy in the US, with a 0.4 percent increase in CPI signalling persistent inflationary pressures, especially in gasoline and shelter costs. 

Retail sales in February, however, provided a silver lining, showing the consumer remained unbowed by high interest rates. A 0.6 percent increase suggests robust consumer spending, supported by a strong job market. However, the persistence of inflationary pressures, as evidenced by rising producer prices and robust service expenditures, means the Fed needs to remain cautious about cutting too soon.

In the crypto world, a UK court presided over a landmark legal decision in Craig Wright’s claim to be Satoshi Nakamoto, the pseudonymous creator of Bitcoin. This ruling not only clarifies Wright’s non-involvement in Bitcoin’s creation but also has significant implications for his ongoing legal battles within the cryptocurrency community.

Meanwhile in Thailand, regulatory amendments have opened the door for institutional investors and “ultra-high-net-worth individuals” to access private funds investing in spot Bitcoin ETFs in the US, classifying these shares as securities. While this move signifies Thailand’s progressive stance towards integrating digital assets into its financial ecosystem, it concurrently highlights the challenges faced by retail investors in accessing emerging investment opportunities in the digital asset space.

Have a good trading week!

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