Bitcoin is having a striking start to the year. Bitfinex, in its latest report, warns about the volatility experienced by the flagship cryptocurrency and how certain recent events influenced its behavior in the market.
The report highlights that the last quarter of 2023 witnessed an impressive 57% increase in the price of Bitcoin, culminating in an annual growth of 155%. However, the new year began with a sharp decline of 11% on January 3, 2024. The news that triggered this downturn was speculation that the long-awaited approval of Bitcoin ETFs could be rejected or postponed by the Securities and Exchange Commission (SEC).
According to Bitfinex, the Correction of Bitcoin, in Addition to Being Healthy, Was Necessary
This rumor led to a massive liquidation in both long and short positions, resulting in the loss of billions of dollars in open positions. Bitfinex analysts, however, argue that these declines and liquidations were predictable and, surprisingly, healthy for the market. They argue that these corrections are necessary to reset extreme bullish trends and mitigate the risk associated with leveraged positions.
The report also highlights on-chain metrics, pointing out a significant increase in “Coin Days Destroyed” on December 27. This observation suggests that long-term BTC holders may have been strategically rearranging their portfolios in anticipation of crucial regulatory decisions related to Bitcoin ETFs.
In economic terms, the report highlights a mixed outlook in the United States. While the construction sector shows an increase in spending, indicating expansion in demand and investment, manufacturing has entered contraction territory. The latest minutes from the Federal Reserve indicate that most officials predict a decrease in interest rates by the end of 2024, despite the complexity of the economic situation.
Additionally, positive news is highlighted, such as preparations for the launch of Bitcoin ETFs by major asset managers and Visa’s initiative to introduce a Web3-based rewards system. Celsius, a cryptocurrency lending platform, announced the divestment of its Ether holdings to pay off debts, while the Bank of Spain is exploring wholesale central bank digital currencies.