Bitcoin rises slightly; outperforms ether
Bitcoin opens the East Asian trading day relatively flat at 1.8% or $22,149. Ether started the day outperforming Bitcoin, trading at $1,550, up 3%.
A broad theme over the last year has been the correlation between the crypto market, the CPI and stocks. Tuesday’s CPI report, which showed CPI decelerating less than expected in January, shook the market, but Bitcoin held on to its uptrend.
Speaking on CoinDesk TV, Martin Leinweber, a digital asset product strategist at MarketVector Indexes, said that the crypto market seems a little “indecisive” at the moment.
“It seems that the market is more focused on the trends and not on the levels,” he said. “Maybe the fact that they changed the methodology for calculating the CPI also plays a role.”
Leinweber said this is causing a shift in market focus from trading beta to seeking alpha in digital assets.
“There is renewed interest in thematic investing,” he said, noting the significant growth of tokens like optimism, layer 2s, and liquid staking derivatives like LIDO.
“DeFi could decouple when compared to Bitcoin,” he said. “There is a greater demand for infrastructure applications.”
“I hope we have some clarifications in the future because investors need to have a reliable stablecoin because we need that in the ecosystem,” he said.
Looking ahead, Leinweber says we need to watch out for meme coins. As the broader tech market gets caught up in the artificial intelligence frenzy fueled by GPT-3, a number of AI-related tokens have popped up.
Leinweber warns that these are just this cycle’s meme coins. “There is no AI on the blockchain!” he said.
Bitcoin’s UTXOs Near Record High; Here’s why it matters
There is another important metric: Unconsumed Transaction Output (UTXO). And Bitcoin’s (BTC) UTXO count is ticking higher and is expected to challenge its all-time high of 84.6 million set in November 2022 – when there was a flurry of on-chain activity as traders attempted to clear the wreckage of FTX’s collapse to escape.
UTXO refers to the individual bitcoin units, called satoshis or sats, involved in transactions on the blockchain.
When a transaction takes place, bitcoins are sent from one address to another and the remaining amount is sent back to the sender in the form of a UTXO.
These UTXOs can then be used as inputs for future transactions, essentially proving that the sender has the funds needed to make the payment.
Now, this rise in UTXO could be explained by an increase in small retail interactions with Bitcoin. It also shows that more individuals – as opposed to whales or large investors – are currently active in the chain.
“It appears as if the overall trade size of Bitcoins has decreased and investors are watching closely how the market direction would develop, with the UTXO value bands below 0.01 BTC being the main reason for the significant increase in UTXO counts,” CryptoQuant Contributing Analyst Dan Lim wrote in a note to CoinDesk, “It’s good progress as there are market players tapping into the market.”
UTXOs have steadily increased in value over the past two years. They saw a brief dip during the coldest lows of the year-end 2022 FTX-induced crypto winter, but resumed their rise as Bitcoin rallied through January.
UTXOs also tell us that despite a new, large cohort of people interacting with Bitcoin thanks to ordinals, there is also a large group of HODLing whales. As CoinDesk previously reported, the age of UTXOs older than five years has increased by 17% over the past six months.
“Overall, the growth in Bitcoin UTXO numbers is a good thing as a greater presence of bitcoins can lead to mass adoption in the long run,” Lim said.
But the question is, what does this mean for Bitcoin’s price? On the one hand, a collision between a large group of steadfast HODLers and a new, growing group of retail users is theoretically optimistic about the price of Bitcoin. However, some are not so sure.
Tony Ling, co-founder of data portal NFTGo and partner at Bizantine Capital, believes that demand for ordinals is not yet high enough to drive Bitcoin’s price higher, although it is causing an increase in activity on the chain.
“There is no mature marketplace on the Bitcoin network, so I have doubts about actual conversion and purchase demand,” he told CoinDesk in a note.
According to Ling, Bitcoin’s recent price surge was fueled by an influx of USDT into Bitcoin, not increased pressure on the Bitcoin network due to ordinal numbers.
Ling is still bullish on Bitcoin’s price and expects it to reach around $30,000-$35,000 — but any attempt to test all-time highs will not happen until the second half of 2024.
Stablecoin issuer Paxos acknowledged that it received a Wells Notice from the US Securities and Exchange Commission citing a possible enforcement action based on allegations that its Binance USD is an unregistered security. Bain Capital Crypto Partner and TuongVy Le, Head of Regulatory and Policy agreed. Also, MarketVector Indexes digital asset product strategist Martin Leinweber shared his crypto market analysis after January CPI rose 0.5% from 0.1% the month before. And Adam Moskowitz, a managing partner at the Moskowitz law firm, was responding to the litigation brewing over control of private FTX cases.