Source: HTX Community
This week, the US’s core PCE for the fourth quarter was revised up to 2.1%, exceeding expectations and highlighting persistent inflationary pressures. Investors’ expectations for the extent of the Federal Reserve’s rate cuts have continued to diminish, believing there will only be a 75-basis-point cut in 2024. Yet, US stocks have continued to strengthen, with tech companies led by NVIDIA supporting the upward trend without signs of a significant pullback. The cryptocurrency market has surged, with several days of significant inflows into US spot ETFs being a primary driver of Bitcoin’s rise. Bitcoin has increased by 24% up to the current week, breaking through $69,000, nearing its all-time high, and beginning a “blood-sucking” market scenario. Bitcoin’s exchange rate against fiat currencies has reached new highs in 30 countries/regions including Japan, Argentina, India, and China, which account for 60% of the world’s population and 30% of the GDP. BTC’s market share has risen to above 50%, a near-historic high in recent years, with only 30% of altcoins outperforming BTC. The current market focus is primarily on AI and memes, with institutions speculating on AI and retail investors on memes.
Although Bitcoin has risen above $69,000, with pleasing momentum, there has been significant divergence at the current price range, with a bullish versus bearish showdown unfolding. Despite the consistent net inflow of Bitcoin spot ETFs, investors worry that the influx of capital may decline, potentially leading to a price adjustment. This mindset indicates that these traders either do not believe in the current bull market or see no need to use leverage amidst macroeconomic uncertainties.
The US Bitcoin ETFs saw a net inflow of $673 million on February 28 alone, accumulating a total of $7.4 billion in net deposits since their launch on January 11. James Seyffart, a senior ETF analyst at Bloomberg, reported these figures, emphasizing that only 150 ETFs have ever surpassed the $10 billion mark in assets under management. Notably, according to Nate Geraci, co-founder of the ETF Institute, BlackRock’s iShares Bitcoin ETF already has over $9 billion in assets. There are two different interpretations of these data. Some believe that such capital inflows may not be sustainable in the long run, either due to a decrease in demand as Bitcoin’s price rises or due to limited preference for exposure to crypto risks. Conversely, from a bullish perspective, as J.P. Morgan analysts suggest, certain traders believe in a “snowball effect”, where the rise in Bitcoin’s price will “further stimulate” ETF sales.
Crypto trader Beanie expressed his view on the X social network, believing that BlackRock and other spot ETF issuers are motivated to deploy their sales teams because “the Bitcoin narrative is compelling”. This implies that there is still a considerable distance to go before the inflow of capital diminishes. The post also highlights the triggering factor of Bitcoin halving, suggesting that it is too early for ETF issuers to sell now, with the halving event not yet upon us. However, if a severe economic downturn occurs or investors are forced to liquidate profitable positions to cover increased financing costs elsewhere, all these assumptions may be invalidated. Economist David Rosenberg predicts an 85% likelihood of a US economic recession in 2024. He emphasizes that once the economy contracts, the stock market will “suffer significant losses”.
Despite a 45% rise in Bitcoin in February, to gauge professional traders’ unease towards Bitcoin, one must delve into the Bitcoin options market. A 25% Delta skew can serve as a monitoring indicator, revealing when trading desks and market makers charge excessively for upward or downward protection. Bitcoin 2-month options 25% Delta skew. Since February 20, the 25% Delta skew of Bitcoin options has remained neutral, fluctuating between -7% and +7%. This indicates that the pricing between bullish (buy) and bearish (sell) options is generally balanced. Interestingly, traders became less optimistic six days after Bitcoin failed to surpass the $52,500 mark. This reflects the anxiety of crypto investors during the accumulation phase.
It is essential to cross-verify data from the Bitcoin futures market to assess the positions of top traders, regardless of whether market makers offer downward protection at prices below upward risk exposure. This indicator integrates positions from spot, perpetual, and quarterly futures contracts. Data shows that top traders maintained a relatively neutral stance until February 26. As Bitcoin climbed above $53,000, net long positions gradually increased. This data somewhat contradicts Bitcoin’s skew data, but this may be attributed to the forced liquidation of short positions. Moreover, the long-to-short ratio has not even reached its monthly peak, making it difficult to assert that professional traders are currently bullish. Therefore, if the influx of spot ETFs continues, traders currently skeptical may need to catch up.
However, BTC has surged to approach its previous all-time high of $69,000, with the monthly line having six consecutive positive closes. As spot ETFs have seen steady inflows, many mainstream US institutions have to make strategic allocations passively. Although the rise has encountered some resistance, sector rotation indicates that in the short term, only altcoins with AI and meme narratives can outperform BTC, with the other 70% of altcoins largely underperforming. Currently, tokens related to AI and MEME narrative sectors are worth focusing on. In this article, we recommend the following three tokens:
1. PEPE: A meme that aligns with the interests of major exchanges, helping to attract new users. During the last cycle, the overall market capitalization of the meme sector was 5%. If it is conservatively set at 2% for this cycle, it could reach a scale of $120 billion. With DOGE and SHIB in maintenance positions, PEPE, which has already been listed on major exchanges, holds significant potential.
2. AR: Formerly the leader on the lifetime storage track, it has transitioned to become an L1 public chain aiming to be an Ethereum killer. Recently, it launched the public testnet Arweave AO, designed to provide computing layers for AI applications.
3. COTI: Originally a payment project in 2017, with a team from Israel. It has recently transformed into a privacy version of L2 for ETH, boasting fully homomorphic encryption technology and claiming to be far superior to Fhenix, which was invested in by Multicoin Capital. With a market capitalization of several hundred million dollars, compared to ZK L2s valued at tens of billions, it offers a higher profit & loss ratio.
Disclaimer: This article is not the official content of the HTX community. The above content is for reference only and does not constitute any investment advice.
