Netizen Weekly | Bitcoin Market Update #2
Fed's Inflation Dilemma vs. Bitcoin's $92.5K Support Test
Hello fellow Netizen,
Bitcoin is currently consolidating around $97,000 after its second attempt to break the psychological $100,000 level. The digital asset market has entered a cooling phase, with capital inflows weakening and derivatives activity declining. These market conditions warrant careful analysis as we approach key technical levels.
Key Takeaway: Watch for a breakout from this distribution phase as volume patterns suggest an impending directional move.
Macro View: Fed's Tightening Risk vs. Treasury Market Stress
The global liquidity environment is undergoing significant shifts that directly impact Bitcoin's market dynamics. January's higher-than-expected U.S. CPI and PPI data suggest persistent inflation pressures, historically a key catalyst for Bitcoin demand as a monetary inflation hedge. The Federal budget deficit's expansion to -7.2% of GDP, combined with anticipated peak global debt refinancing in Q3 2025, creates a compelling backdrop for Bitcoin's value proposition.
However, this presents a critical inflection point: if inflation reaccelerates, the Fed may be forced to maintain tight policy or even hike further, potentially pressuring risk assets including Bitcoin. Conversely, any pivot toward accommodation to support Treasury markets could fuel Bitcoin's narrative as an inflation hedge.
Key Takeaway: Monitor core PCE (inflation) trends as the Fed's response could determine Bitcoin's next major move.
On-Chain Pulse: Smart Money De-Risking from Altcoins to Bitcoin
The crypto market is showing clear signs of risk reduction. Perpetual futures open interest has contracted sharply across the board, with Bitcoin declining 11.1%, Ethereum 23.8%, and Solana 6.2%, indicating a significant unwinding of leveraged positions. While Bitcoin funding rates maintain slightly positive territory, altcoins have turned deeply negative, particularly in memecoins where funding rates have reached extreme lows. This suggests early signs of capital rotation into Bitcoin's relative stability.
Most importantly, institutional commitment through ETFs remains strong, with Bitcoin ETF buy-side activity exceeding 8% of global spot volume during recent dips, while Ethereum ETF demand has evaporated to near-zero flows. This divergence, combined with realized supply density gathering within ±15% of spot price, historically indicates accumulation by stronger hands before significant market moves.
Key Takeaway: Capital rotation from altcoins to Bitcoin is underway – watch ETF inflows to confirm smart money continues supporting BTC while avoiding altcoin risk.
Cost Basis Update: Short-Term Price Levels to Watch
Current Bitcoin Price ($97,039) relative to major cost basis levels:
4.8% above STH Cost Basis ($92,576)
124% above Realized Price ($43,331)
290.3% above LTH Cost Basis ($24,864)
51.2% above True Market Mean Price ($64,189)
The proximity to the STH cost basis ($92,576) presents a crucial market dynamic – historically, this level acts as a psychological pivot point where recent buyers transition between profit and loss. Current consolidation just above this level, coupled with increasing realized supply density within ±15% of spot price, suggests we're in a critical accumulation phase. Support levels are forming around the STH cost basis, while resistance remains at the recent local top of $105,000.
Key Takeaway: Use the $92,576 STH cost basis as your immediate risk level for near-term positions.
Power Law Update: Money Evolution in Crisis
Weekly Bitcoin Price ($97,627) relative to Power Law Bands:
156.9% above Support ($38,006)
72.9% above 25th Percentile ($56,474)
27.4% above Median ($76,657)
8.4% below 75th Percentile ($106,555)
54.9% below Resistance ($216,520)
We find ourselves in a Fourth Turning - a crucial period of institutional crisis and transformation that historically occurs every 80-100 years. The 2008 financial crisis marked its beginning, and Bitcoin emerged as a direct response to the systemic failures it exposed. Like previous Fourth Turnings (American Revolution, Civil War, Great Depression/WWII), this era demands a fundamental restructuring of our monetary system.
Bitcoin's power law growth reflects not just technical adoption, but a growing recognition of the need for monetary evolution amidst unprecedented global debt expansion and institutional decay. Its trajectory within these bands suggests steady accumulation without the excesses typical of previous cycles, indicating a more mature market understanding of Bitcoin's role in this historical transition.
Key Takeaway: Price trading above median but below 75th percentile suggests mildly elevated valuations, but with room for both upside and downside.
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Thanks for reading this week's note! See you next week – and as always, hit reply if you have any questions, comments, or suggestions!
Take care - Brian
Disclaimer: This newsletter is for informational purposes only and should not be considered financial advice. Always conduct your own research and consult with a qualified financial advisor before making investment decisions.