Bitcoin BTC price holds steady on CPI data. Are investors uncertain?

Bitcoin ticks up a bit; Ether transcends

Bitcoin opens the trading day in East Asia relatively flat at 1.8%, or $22,149. Ether has started the day outperforming bitcoin, trading at $1,550, up 3%.

A broad theme over the past year has been the correlation between the crypto market, the consumer price index and stocks. Tuesday’s CPI report, which showed that January’s CPI decline was lower than expected, rattled the market, but bitcoin held its ground.

Speaking on CoinDesk TV, Martin Leinweber, a digital asset product strategist at MarketVector Indexes, said the crypto market seems a bit “undetermined” right now.

“It seems the market is focusing more on the trends, and not the level,” he said. “Perhaps the fact that they have changed the methodology for calculating the CPI going forward is also a role.”

Leinweber said this is leading to a shift in market focus from beta trading to looking for alpha in digital assets.

“There is a renewed interest in thematic investing,” he said, pointing to the significant growth in tokens such as optimism, lag-2s and liquid stake derivatives such as LIDO.

“DeFi can be disconnected when you compare it to bitcoin,” he said. “There is a greater demand for infrastructure applications.”

“My hope is we have some clarity going forward because investors need to have a reliable stable coin because we need that in the ecosystem,” he said.

Looking forward, Leinweber says we need to watch out for meme coins. As the broader tech market is caught up in the GPT-3-fueled artificial intelligence frenzy, a number of AI-related tokens have emerged.

Leinweber cautions that these are just this cycle’s meme coins. “There is no AI in blockchain!” he said.

Bitcoin’s UTXOs Approach Record Highs; Here’s why it matters

There is another metric that is also important: unused transaction output (UTXO). And the bitcoin (BTC) UTXO count is ticking upwards, set to challenge the all-time high of 84.6 million from November 2022 – when there was a flurry of activity on the chain as traders tried to escape the wreckage of FTX’s collapse.

UTXO refers to the individual units of bitcoin, called satoshis, or sats, that are locked in transactions on the blockchain.

When a transaction occurs, bitcoins are sent from one address to another and the remaining amount is returned to the sender in the form of a UTXO.

These UTXOs can then be used as input for future transactions, essentially proving that the sender has the necessary funds to make the payment.

Now, this rise in UTXO can 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 on the chain.

“It appears that the overall trading volume for bitcoins has decreased and investors are closely watching how the market direction will play out with the UTXO value bands with less than 0.01 BTC being the main reason for the significant increase in the UTXO count,” CryptoQuant Contributing Analyst Dan Lim wrote in a note to CoinDesk: “There is good progress as there are market players taking advantage of the market.”

UTXOs have been steadily increasing over the past two years. They experienced a brief dip during the coldest depths of the 2022 FTX-induced, end-of-year crypto winter, but resumed their climb as bitcoin rallied through January.

UTXOs also tell us that despite a new, large group of people interacting with bitcoin thanks to Ordinals, there is also a large group of whales holding on. As CoinDesk previously reported, the age of UTXOs older than five years has increased by 17% in the past six months.

“Overall, the growth of Bitcoin UTXO counts is a good thing because more exposure of bitcoins can create mass adoption in the long run,” Lim said.

But the question is, what does this mean for the price of bitcoin? On the one hand, a collision between a large group of faithful HODLers and a new, growing group of retail users is in theory bullish for the price of bitcoin. Others, however, are not so sure.

Tony Ling, co-founder of the data portal NFTGo, and a partner in Byzantine Capital does not believe that the demand from Ordinals is high enough yet to increase the price of bitcoin, even if it leads to an increase in activity on the chain.

“There is no mature marketplace on the Bitcoin network, so I have doubts about the real conversion and purchase demand,” he told CoinDesk in a note.

According to Ling, bitcoin’s recent price rise has been driven by an influx of USDT into bitcoin, not by increased pressure on the Bitcoin network due to ordinals.

Ling remains bullish on the price of bitcoin and expects it to reach around $30,000-$35,000 – but any attempt to test all-time highs won’t be until the second half of 2024.

Stablecoin issuer Paxos acknowledged that it had received a Wells notice from the US Securities and Exchange Commission, indicating possible enforcement action based on the allegation that Binance USD constitutes an unregistered security. Bain Capital Crypto Partner and Head of Regulation and Policy TuongVy Le weighed in. Additionally, MarketVector Indexes Digital Asset Product Strategist Martin Leinweber shared his crypto market analysis after January CPI rose 0.5% versus 0.1% a month earlier. And Moskowitz Law Firm managing partner Adam Moskowitz responded to the legal battle over control of private FTX cases.