Lawrence Jengar
Jan 08, 2025 08:20
Bitcoin’s supply is tightening as its price reaches new highs, creating a bullish outlook for the cryptocurrency market, according to Bitfinex Alpha.
Bitcoin’s (BTC) price has recently surpassed the $108,000 mark, indicating a robust market performance as noted in Bitfinex Alpha’s first 2025 edition. Despite potential market corrections expected in Q1 2025, the tightening supply of Bitcoin suggests a bullish medium-term outlook.
Bitcoin Supply Dynamics
The liquidity reserve ratio, a measure tracking the current supply’s duration, has dramatically decreased from 41 months to just 6.6 months. This indicates that the available Bitcoin on the market can only satisfy demand for a limited period, highlighting a rapid depletion of supply. Such a trend was particularly evident during the strong price rallies in Q1 and Q4 of 2024.
Miner Activity and Market Impact
Bitcoin miners, traditionally known for selling significant amounts of Bitcoin during halving years, have notably reduced their exchange deposits since April 2024. The amount of Bitcoin sent to exchanges by miners has hit a multi-year low as they hold onto substantial unrealized profits, opting to ‘hodl’ rather than sell.
The overall selling pressure from miners, long-term investors, and other groups has significantly decreased, mitigating the effects of recent market corrections. This reduced supply pressure contributes to the ongoing strength in Bitcoin’s market performance.
US Economic Context
As 2024 concluded, the US economy showed signs of recovery, although certain sectors remain uncertain. The labor market remained strong, with unemployment claims dropping to an eight-month low of 211,000 by the end of December, defying expectations and reinforcing confidence in the economy’s resilience. This unexpected decline, along with reduced continuing claims, indicates a gradually cooling labor market without signaling a widespread recession. Positive labor data has bolstered market sentiment, strengthened the dollar, and supported modest gains on Wall Street.
Conversely, the construction sector presents a bleaker picture, with spending stagnating in November following modest growth in October. Gains in single-family home construction were offset by declines in multi-family housing and public investment. High mortgage rates, driven by anticipated fiscal policy changes under the incoming administration, are weighing on housing demand and new projects. The construction industry faces accompanying challenges, including potential tariffs, labor shortages, and trade uncertainties, which may hinder sustainable growth despite potential boosts from future infrastructure spending.
Global and Crypto Market Developments
Meanwhile, the manufacturing sector shows signs of recovery but remains under pressure. The Purchasing Managers’ Index (PMI) rose to 49.3 in December, the highest since March, yet still below the growth threshold of 50. Despite improvements in production and new orders, the sector struggles to fully recover from prolonged downturns due to higher borrowing costs following previous Federal Reserve interest rate hikes. Recent rate cuts and prospects of fiscal stimulus under the upcoming administration offer a glimmer of hope, but concerns about trade policy and volatile global demand continue to overshadow the sector’s outlook.
In other cryptocurrency news, US Congressman Mike Collins disclosed investments in the cryptocurrency Ski Mask Dog (SKI), with purchases ranging from $1,001 to $15,000. His filing, one of the first for 2025, underscores the growing intersection of digital assets and politics, raising questions about transparency and regulatory oversight. Meanwhile, the defunct cryptocurrency exchange FTX has initiated a restructuring plan to compensate users affected by its 2022 collapse. Customers who filed claims can expect refunds within 60 days, with smaller claims prioritized. Additionally, MicroStrategy announced plans to raise up to $2 billion through the issuance of perpetual preferred stock. This initiative is part of the company’s ambitious ’21/21 Plan’ to secure $42 billion over three years for Bitcoin acquisition, solidifying its position as the largest Bitcoin holder with over 145,000 BTC.
For more details, visit the Bitfinex Alpha.
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