Bitcoin’s supply is tightening, and with its price recently skyrocketing past $108,000, the outlook for the cryptocurrency market appears increasingly bullish, as highlighted by Bitfinex Alpha. This surge in value has sparked interest across various investor circles, but it also raises some eyebrows regarding future supply shortages.
Bitcoin Supply Dynamics
The liquidity reserve ratio, which measures how long the current supply lasts, has plummeted from 41 months to a mere 6.6 months. This drastic reduction signifies that the Bitcoin available in the market can only meet demand for a limited period, illuminating a swift depletion of supply. This pattern was most notable during the strong rallies observed in Q1 and Q4 of 2024.
Miner Activity and Market Impact
Interestingly, Bitcoin miners, typically recognized for cashing out hefty amounts of BTC during halving years, have significantly cut down their transactions with exchanges since April 2024. The volume of Bitcoin transferred to exchanges by miners has reached multi-year lows as they choose to hold onto their assets, capitalizing on unrealized profits instead of selling off their stakes. This reduced selling activity from miners, alongside long-term investors, has alleviated some pressure from the market during recent corrections, further supporting ongoing strength in Bitcoin’s performance.
U.S. Economic Context
As 2024 wrapped up, signs of recovery became evident in the U.S. economy. Unemployment claims dipped to an eight-month low of 211,000, defying predictions and boosting confidence in the economy’s sturdiness. This unexpected drop, paired with fewer ongoing claims, suggests a slowly but surely cooling labor market without foreshadowing a full-blown recession. Strong labor statistics have also lifted market sentiment, fortified the dollar, and contributed to modest upticks on Wall Street.
However, not all sectors paint a rosy picture. The construction industry has encountered turbulence, with spending stagnating in November after slight growth in October. High mortgage rates, influenced by proposed fiscal policy shifts from the new administration, are placing strain on housing demand and new projects. Challenges such as potential tariffs, labor shortages, and trade uncertainties loom large over the construction landscape.
Global and Crypto Market Developments
On a global scale, the manufacturing sector exhibits signs of bounce back, yet it still finds itself under stress. The Purchasing Managers’ Index (PMI) climbed to 49.3 in December, marking the highest level since March, though it remains just shy of the growth mark of 50. With improvements in production yet hampered by increased borrowing costs stemming from prior Federal Reserve interest rate hikes, the sector battles to regain its footing. Recent rate cuts and the hint of fiscal stimulus under the upcoming government offer a flicker of hope, but concerns regarding trade policies and fluctuating global demand cloud the horizon.
In a splash of digital intrigue, U.S. Congressman Mike Collins recently revealed investments in the cryptocurrency Ski Mask Dog (SKI), showcasing his purchases ranging from $1,001 to $15,000. This filing, one of the first of 2025, raises concerns about the intertwining of digital assets and politics, prompting discussions on regulatory oversight and transparency. Meanwhile, the fallen exchange FTX has embarked on a restructuring journey to reimburse users affected by its 2022 collapse. Customers expecting refunds can look forward to adjustments within 60 days, with priority given to smaller claims. Additionally, MicroStrategy has announced ambitious plans to raise up to $2 billion through perpetual preferred stock to further its ’21/21 Plan’, aiming to gather $42 billion over three years devoted to Bitcoin acquisition.
As Bitcoin navigates this bustling environment of rising prices and tightening supply, investors and enthusiasts alike watch with anticipation. The interplay of economic factors and market sentiments continues to shape the landscape, making this an exciting time for those invested in crypto assets.
