Bitfinex Alpha | BTC Consolidation Likely After Bull Run

Bitcoin has been on a tear, hitting $70,000 on Bitfinex today (29 July), despite a brief pullback mid-week and after facing some tough resistance. BTC has now bounced back more than 30 percent from the July 5 low, which we had earlier predicted as likely the local bottom.

This upward momentum coincided with the Bitcoin 2024 Nashville conference. Implied volatility in the BTC options market also initially spiked but later declined as traders de-risked. With a significant options expiry looming on Friday, August 2nd, a return of some calm to the market potentially presages a period of consolidation or minor pullbacks for prices.

Indeed, despite upper resistance being breached, net market selling was evident last week, as profit-taking pressured the market, aided also by the gradual distribution of BTC to Mt. Gox creditors. However, the market absorbed this well, suggesting stronger hands are stepping in. In addition, the current short-term holders’ realised price at $65,700 acted as solid support. Futures markets also saw a surge in open interest, indicating that leverage is back in play. Despite the spot market selling, leveraged longs have been buoying the price.

Looking ahead, the market’s next moves will be crucial. The recent reduction in implied volatility and the increase in leveraged positions suggest a short-term stall or range-bound trading. With key support holding and bullish momentum building, the stage is set for an intriguing week ahead for BTC.

The US economy demonstrated stronger-than-expected growth in the second quarter of 2024, with GDP increasing at an annual rate of 2.8 percent, surpassing forecasts. This growth was fueled by significant consumer spending and business investment, highlighting the resilience of the economy. 

Inflation pressures also eased, with prices rising moderately as lower goods costs offset increased service prices, reinforcing the likelihood of a Federal Reserve interest rate cut in September. However, the housing market remains a drag on growth, with existing home sales dropping more than anticipated due to record-high median house prices. Despite this, increasing supply and decreasing mortgage rates bring hope for a potential rebound. Overall, the economic outlook is cautiously optimistic, with robust growth, moderated inflation, and potential improvements in the housing market.

In crypto news last week, the SEC approved the 19b-4 form for Grayscale’s new Bitcoin Mini Trust, trading under the ticker “BTC.” This trust will distribute new shares to GBTC shareholders, enhancing transparency and market order. Meanwhile, the State of Michigan Retirement System has invested $6.6 million in the ARK 21Shares Bitcoin ETF, following a similar – though significantly larger – investment by Wisconsin City.

On the regulatory front, the Federal Reserve Board terminated all enforcement actions against Silvergate Bank and its parent company, Silvergate Capital Corporation. However, despite ceasing banking activities, Silvergate still faces legal challenges, including a recent SEC lawsuit for alleged involvement in the FTX fraud.

In the political arena, US presidential candidate Donald Trump highlighted Bitcoin’s potential to revolutionise the US economy, emphasising his desire for American dominance in cryptocurrency. Trump promised to appoint a new SEC chairman supportive of crypto innovation and proposed establishing a strategic national Bitcoin stockpile. He also predicted that Bitcoin’s value would surpass traditional assets and opposed central bank digital currencies, pledging to make the US a leading crypto nation.

Have an excellent trading week.

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