Crypto markets could face macro and technical headwinds in the near term, as highlighted by Coinbase. According to the latest analysis, liquidity may be impacted by quarter-end rebalancing, potentially affecting market dynamics.
Despite bitcoin (BTC) reaching a new all-time high, there are concerns regarding macro headwinds and negative technical factors that could limit further gains in the short term. Coinbase’s report, authored by analysts David Duong and David Han, points out that while the initial short covering move boosted prices, it seems to have reached its peak. However, U.S. spot bitcoin ETFs continue to play a significant role in sustaining demand for bitcoin.
Historically, liquidity conditions have hindered price momentum in previous cycles, but current market dynamics present a different scenario. Yet, as the report suggests, these support drivers may face challenges from macroeconomic uncertainties and technical factors in the coming weeks.
One key factor to watch is the expiration of the Bank Term Funding Program (BTFP) by the Federal Reserve, which could impact U.S. regional banks and financial stability. Furthermore, a decrease in cash reserves among fund managers, combined with quarter-end rebalancing activities, could further constrain liquidity in the market.
In light of these factors, Coinbase predicts that bitcoin is likely to trade within a narrow range until the next significant event – the bitcoin halving scheduled for mid-April. The quadrennial event will halve bitcoin mining rewards, impacting the supply side dynamics in the market.
Notably, the rise of exchange-traded funds (ETFs) has altered bitcoin’s market dynamics and disrupted traditional patterns observed during previous halving cycles. The report emphasizes that the cumulative growth in BTC holdings by ETFs has surpassed that generated by miners, underscoring the evolving landscape of cryptocurrency investment vehicles.
As the crypto industry navigates through these challenges and developments, it becomes evident that a deeper understanding of the market dynamics and evolving trends is crucial for all stakeholders involved.
