Bitfinex, one of the leading cryptocurrency exchanges, has released its latest Bitfinex Alpha report, offering valuable insights into the dynamic crypto market. In this week’s publication, it was revealed that the amount of unmoved bitcoin has reached an all-time high. This intriguing development can be attributed to the growing interest of institutional investors in the digital asset.
According to the report, approximately 70% of BTC’s circulating supply has remained unmoved for at least a year, which is the highest ever recorded. This statistic is based on data from Ark Invest, an investment firm led by the renowned Cathie Wood. The increasing involvement of institutional investors in bitcoin indicates a strong bullish sentiment and unwavering confidence in its long-term prospects.
Furthermore, the report highlights the significant increase in bitcoin holdings on over-the-counter (OTC) desks, which serve as reliable indicators of institutional activity. By the end of the third quarter, the BTC balance held on these desks had surged by an impressive 60%, reaching a one-year high in June. This growth suggests that institutions and large investors are actively embracing cryptocurrency as an attractive investment option.
Potential Shift in Market Dynamics as Derivatives Traders Gain Influence
Interestingly, the report also notes a notable surge in Bitcoin Open Interest, which has increased by over 38% since the initial spot Bitcoin ETF filing by BlackRock, the world’s largest asset manager. This rise indicates a potential shift in market dynamics, with derivatives traders potentially exerting greater influence on the current momentum, surpassing spot traders.
However, Bitfinex researchers caution that increased positions in futures contracts typically indicate short-term downward pressure on BTC’s price. Traders are advised to closely monitor this trend, as it could impact market performance in the short run.
Bitcoin Liquidity Decreases as Tether USDT Liquidity Rises
The report also highlights a decline in bitcoin liquidity, contrasting with a substantial increase in the liquidity of Tether USDT, the largest stablecoin in the market. This decrease in BTC liquidity aligns with the trend of long-term bitcoin holdings, as described in the publication.
The researchers explain that as more investors hold onto their bitcoin, less of it is available for trading, resulting in decreased liquidity. This trend of “HODLing” is often seen as a testament to the confidence placed in bitcoin’s long-term value, despite temporary market fluctuations.
However, it is important to note that insufficient liquidity can lead to increased price volatility. When there is less BTC available for trading, price changes can become more drastic, posing risks for traders.
The Bitfinex Alpha report reveals the growing interest of institutional investors in bitcoin, as evidenced by the surge in unmoved bitcoin and increased positions on OTC desks. Furthermore, the rise in Bitcoin Open Interest suggests a potential shift in market dynamics. However, traders should be cautious of short-term downward pressure on BTC’s price. Additionally, the decrease in bitcoin liquidity and the rise in Tether USDT liquidity indicate the trend of long-term bitcoin holdings. While this trend reflects confidence in bitcoin’s value, it may result in increased price volatility due to insufficient liquidity.