Bitfinex Alpha | Spot trading leads market momentum as geopolitical circumstances escalate - Bitfinex blog
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Bitfinex Alpha | Spot trading leads market momentum as geopolitical circumstances escalate

In the cryptocurrency market, there has been a noticeable shift towards spot trading. Long-term investors now hold a record 80.34 percent of the total Bitcoin supply, equivalent to around 15 million BTC. In contrast, short-term holders account for only 19.34 percent of the circulating supply, indicating a strong commitment to holding assets. Coins moving on-chain aren’t showing significant profit or loss, suggesting a transitional market. Simultaneously, the futures market has seen a surge in open interest (OI) for assets like BTC and Ether, with an aggregate OI for BTC across centralised exchanges exceeding $8.7 billion. However, spot trading volumes on these exchanges are at multi-year lows, and the estimated leverage ratio has surged, indicating heightened market risk.

Global geopolitical tensions have reverberated in financial markets. Gold, traditionally a safe haven, saw a notable uptick in value, while Bitcoin’s response was comparatively muted. The options market shows a discernible shift towards downside protection, reflecting a surge in hedging activities, particularly in the face of escalating geopolitical tensions. The put/call ratio has increased, and there’s heightened open interest in long-dated calls set to expire in December.

Beyond the cryptocurrency sphere, global events have left their mark. A conflict between Hamas and Israel on October 9th resulted in a four percent spike in oil prices, highlighting the fragility of the energy supply chain. This price spike could have a ripple effect on energy costs, ultimately impacting the wallets of American consumers. Additionally, inflationary pressures have surfaced in the US, with unexpected increases in producer and consumer inflation rates in September, raising questions about the purchasing power of everyday Americans.

In terms of leadership changes and regulatory developments, Paolo Ardoino assumed the role of CEO at Tether, indicating a strategic move towards achieving greater growth and global expansion for the stablecoin issuer. Meanwhile, the SEC chose not to appeal a court ruling directing them to reconsider Grayscale Investments’ application for a Bitcoin Exchange-Traded Fund (ETF), generating optimism within the cryptocurrency community. On the international stage, the G20 presented a united front by unanimously endorsing the “G20 Finance Ministers and Central Bank Governors Communique,” signifying a collective commitment to a coordinated approach to cryptocurrency regulation. In Europe, the European Securities and Markets Authority (ESMA) expressed significant concerns about Decentralised Finance (DeFi), raising worries within the crypto community about the future of decentralised architecture and digital identities, particularly concerning privacy issues in the European region.

Economic sentiment also experienced a decline in October. Preliminary data from the University of Michigan Survey revealed a drop in consumer confidence to its lowest point since May. This drop in sentiment poses a challenge for the central bank as it prepares for its upcoming November meeting. The central bank must delicately balance the management of inflation while supporting economic growth, given the complex economic environment.