Welcome to our latest edition of the Epic Mining Market Update, in which we give you the highlights of what is changing the financial landscape. The price movement over the past month has largely been fueled by spot Exchange-Traded Funds. These developments are attracting a lot of interest from a broad spectrum of professionals. Today we update you on everything you need to know about the latest developments!
Table of contents
Summary:
- In January, the year-on-year CPI increase was about 3.1%, exceeding the Fed target of 2%.
- Eurozone inflation peaked at 10.6%, while current inflation is around 2.8%.
- US inflation peaked at 9.1% and currently stands at 3.1%.
- The market expects unchanged interest rates for the next FOMC meeting.
- Significant shift in BTC distribution among issuers after ETF approval.
- Total Bitcoin share in ETFs is now 287K, with BlackRock as the largest shareholder.
- Over $4.8 billion inflows into ETFs, total BTC in ETFs is 720,000.
- Bitcoin has crossed $50k, signaling a bullish trend pre-halving.
- The downward trend of the ETH/BTC ratio indicates that Bitcoin is superior to Ethereum.
- The high percentage of supply in profits
- Pi cycle suggests more growth potential for Bitcoin
Bi-weekly market changes
10 – 02 / 25 – 02
News
Inflation in Europe and the US is getting higher.
In our last edition, we delved into the Fed's interest rates. This time we examine the current state of inflation.
The consumer price index (CPI), despite its widespread use, is not a flawless tool for measuring changes in the price dynamics of an economy. As Michael Saylor puts it, "Inflation is a vector." The prices of different goods respond differently to changes in the money supply, and the basket of goods that the CPI measures may not accurately reflect the spending patterns of the average American.
Still, the Federal Reserve relies on the CPI as a key inflation indicator. The year-on-year increase in the CPI in January was about 3.1%, exceeding the Fed target of 2%. This inflation figure has again adjusted expectations for Federal Funds Rate cuts, which are now not expected to begin until the Fed meeting in June. Currently, the CPI stands at 3.1%, as shown in the chart below.
If we shift our focus to Europe, we see similar trends to the U.S., albeit with lower inflation rates. The Eurozone experienced peak inflation of 10.6%, compared to a peak of 9.1% in the US. Currently, Eurozone inflation is hovering around 2.8%, after previously falling to 2.4%, while the U.S. sits at 3.1%, with a low of 3.0%.
These data raise the question: Will the U.S. central bank cut interest rates soon? Not immediately, as discussed earlier. Inflation may rebound unexpectedly, so it is crucial not to ease monetary policy prematurely, at the risk of destabilization. Remember that inflation always affects those who do not control the money supply.
Current market sentiment expects unchanged interest rates for the next Federal Open Market Committee (FOMC) meeting on March 20, with 96% expecting no change, as the chart below shows.
Looking ahead to the May 10 meeting, 74% predict flat rates, while 26% anticipate a decrease. No one foresees an increase. These projections are based on current data, but if new information emerges before the May meeting, the perspectives will shift. Thus, one should interpret these projections with caution.
The main conclusion? The market is currently showing a positive outlook, which is likely to have a favorable impact on all asset classes. Inflation, a constant economic factor, usually erodes the value of assets. Therefore, for people looking to protect their assets, investing in Bitcoin over the long term may be a wise strategy.
Bitcoin ETFs continue to rise
We have observed a significant shift in the distribution of BTC among issuers following the approval of these ETFs. Grayscale has experienced significant outflows, while the newly approved ETFs are seeing significant inflows. This trend is largely attributed to the lower fees offered by the new ETFs - a big contrast to Grayscale's Bitcoin Trust (GBTC), which charges a 1.5% fee. Fidelity and BlackRock, for example, have set their fees at just 0.25% and even offer exemptions or discounts during the initial period.
Another factor affecting this shift is the liquidation actions of large GBTC holders. FTX, for example, has liquidated about $1 billion worth of GBTC, and Digital Currency Group's Genesis investments have made similar moves. Despite these outflows, the overall picture remains positive.
Bitcoin's total stake in an ETF is now 287K, with BlackRock as the largest shareholder. As the chart below shows.
Since the official launch of ETFs, there have been inflows of more than $4.8 billion, with as much as $37 billion absorbed by exchange-traded products. The chart below shows BTC inflows into ETFs. That's about 113k BTC that have flowed into ETFs since Jan. 11. This number is lower than the 287,347 in the chart above because it does not include the flow of BTC from grayscale into other ETFs. The total number of BTC in an ETF right now is an astounding 720,000 Bitcoins.
What does this mean for Bitcoin and its investors? The advent of ETFs has opened new avenues for investment in Bitcoin. This has led to a significant increase in the total capital flowing into the Bitcoin market. The lower cost of these ETFs makes them more attractive compared to traditional products such as GBTC. The introduction of the ETF also makes it possible for other ETFs to include Bitcoin in their basket, as we saw with Fidelity's Conservative ETF. As Bitcoin becomes more accepted and trusted, these trends in ETFs will grow the market.
Technical analysis
Bitcoin passes $50k: Pre-Halving Bull Run signals great potential
Bitcoin has passed the $50k mark, and this is before the halving has even taken place! This is an important bullish signal for what is to come after the halving, when Bitcoin becomes even more scarce. We have seen a wonderful bounce off the 100-day moving average (the orange line), which we are using as support, and now we are facing $52.5k as resistance.
The Relative Strength Index (RSI) is in overheated territory and many are currently making gains (this will be discussed later in the chain analysis section). This means that a pullback in Bitcoin's share price would not be surprising. In this scenario, "buy the dip" seems like good advice, as there is still a lot of room for growth.
ETH vs. BTC: BTC wins
It is always nice to know if you have invested in the best assets. Bitcoin is followed by Ethereum as the second largest crypto-currency. Over the past two years, we have observed a downward trend in the ETH/BTC price ratio. This indicates that Bitcoin has gained in value more than Ethereum during this period. To be exact, Bitcoin's value increased by 30% more than Ethereum's. Congratulations to all Bitcoin miners - you made the right decision!
After finding support at around 0.05, Ethereum's value has rebounded in Bitcoin terms in an attempt to reverse the post-merger downtrend. Retail market participants are eagerly awaiting the approval of an Ethereum ETF. However, this is a much more complex proposal than a Bitcoin ETF, due to the significantly different decentralization profiles of the two assets. Given continued inflows into BTC from institutional investors, it seems unlikely that Ethereum will surpass Bitcoin in growth.
Chain Analysis
Percentage of supply in profit: Short-term forecasts
The number of people with profits is a valuable indicator for short-term market predictions. The logic behind it is quite simple. If most people are making losses, a massive sell-off is unlikely because they are already making losses. Conversely, if most people are making a profit, they are more likely to take a profit. This is not rocket science, but simple market dynamics.
We are currently approaching a high percentage of people with profits. Markets balance themselves out. When too many people make a profit, eventually the selling starts. Bitcoin has grown significantly in recent months. Caution is advised, as some investors may start taking profits. However, long-term holders need not worry. Any drop in price should be seen as an opportunity to accumulate more at a discount.
Pi cycle indicator predicts more growth space in the future
The Pi cycle has historically been a reliable indicator for predicting market tops. It determines whether a market is overheated or not, based on some underlying mathematical principles that we will not go into further here. As the chart below shows, we can expect a price drop once the Pi-cycle lines converge.
Currently, this convergence has not yet occurred, suggesting that even if the previous chart indicates a possible sell-off of Bitcoin, the main trend will certainly remain upward. Therefore, any price drop should be considered a buying opportunity.
We wish you a good week and keep those mining rigs running!
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