Bitfinex Alpha Report—Crypto Market Contraction Deepens With Inflation, Policy Risks in Focus

Bitcoin has traded between $91,000 and $102,000 for over 90 days as fading institutional demand and macroeconomic pressures stall momentum

Bitcoin’s price remained largely stagnant over the past 90 days, with a narrow trading range of $91,000 to $102,000. A Bitfinex Alpha Report attributed this lack of momentum to waning institutional demand and macroeconomic pressures.

The report highlighted bitcoin’s brief volatility spike on Feb. 21, coinciding with a $1.5 billion hack of crypto exchange Bybit. Amidst broader equity market turbulence, bitcoin experienced a 4.7% intraday drop before partially recovering.

According to the report, a broader crypto market correction occurred, with solana (SOL), meme coins, and ether (ETH) declining by 16.9% to 37.4% in February following late-2024 rallies.

The Bitfinex report also noted a sharp decline in institutional participation, with U.S. spot bitcoin exchange-traded funds (ETFs) experiencing net outflows of $360 million on Feb. 20 alone. This contrasted sharply with peak inflows of 18,000 BTC daily during November.

Moreover, the report highlighted the challenges faced by crypto in the current economic climate, with the University of Michigan’s consumer sentiment index falling to a 15-month low in February.

Additionally, one-year inflation expectations rose to 4.3%, presenting obstacles to the Federal Reserve's efforts to curb inflation.

According to Bitfinex market strategists, proposed U.S. tariffs and a decline in new home construction (-8.4%) in January due to material costs and high mortgage rates further contributed to the economic headwinds.

The report also noted bitcoin’s correlation with traditional markets, specifically the S&P 500’s struggle to maintain levels above 6,000, which dampened risk appetite.

The report concluded that declining leveraged trading activity, evident in yearly lows for bitcoin (-11.1%) and ethereum (-23.8%) in open interest, indicated a "broader market contraction."

Among crypto-specific developments, the report highlighted Strategy’s $2 billion convertible notes offering to finance bitcoin acquisitions. Additionally, Howard Lutnick's confirmation as U.S. Commerce Secretary was noted, which Bitfine benches suggested could lead to easing crypto regulations.

However, the Bybit hack, reportedly attributed to North Korea's Lazarus Group, remained a persistent concern, contributing to market suppression. Despite this, the report mentioned potential ether (ETH) buybacks that could offset selling pressure.

The Bitfinex market analysis concluded by emphasizing the dependence of bitcoin's next decisive move on macro trends and advised caution as markets awaited further catalysts.

"Cooling demand on the spot side has led to a substantial drop in perpetual open interest (OI) across all major assets, indicating a reduction in speculative activity and lower cash-and-carry yields," the report stated.