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Bitfinex Alpha | More BTC Price Increases to Come as ETF Flows Continue

Open interest in Bitcoin futures and perpetual pairs across centralised exchanges has hit a new record, climbing to over $26 billion. The surge in OI reflects the bullish momentum behind BTC, which rose by 44 percent in February, its strongest monthly performance in percentage terms since December 2020.

The net inflows into Bitcoin ETFs (now at $7.5 billion) are a significant driver of course, and we believe that there are still more flows of capital to come. More traditional finance wealth advisors and investment platforms will make the ETFs available to their customers, and allocations will increase.

The enthusiasm for Bitcoin has also spilled over into other coins. The TOTAL3 index, representing all crypto assets excluding Bitcoin and Ether, has witnessed a 50 percent surge since January 22nd. Notably, memecoins and AI-related projects are currently leading the charge in both spot accumulation and futures speculation, signalling a diversification in investor interest beyond the leading cryptocurrencies.

In the macro economy, inflation remains sticky. With the latest rise reported in the January PCE index, we believe now that current market expectations of four quarter-point interest rate cuts for the year, may need to shift in trajectory, potentially leading to fewer rate cuts. Even though the US reported underwhelming growth in sales of new single-family homes in January, demand for homes remain robust and house prices – a key inflationary factor – continue to rise.

Meanwhile, in the crypto sphere, Hong Kong is rapidly emerging as a cryptocurrency hub, evidenced by the 22 companies that have applied for licences to operate crypto exchanges accessible to retail investors. 

This contrasts with the regulatory landscape in the US, with Hester Peirce, an SEC commissioner, voicing criticism towards the SEC’s current regulatory approach and calling for clearer, definitive rules around the classification of digital assets as securities. 

While the regulatory wheel continues to slowly turn, the overall enthusiasm for crypto assets, however, remains undimmed. 

Total value locked in Decentralised Finance (DeFi) lending protocols has now soared above $32 billion. This is indicative of the growing confidence and perceived stability in the market, as DeFi has matured and security and transparency has increased. Similarly, household traditional finance names such as Fidelity are recommending 1-3 percent allocations to crypto.

Have a great trading week!

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