Coinbase, a leading American cryptocurrency exchange, has issued a report expressing concerns for the Bitcoin and broader crypto market, despite recent price surges. The report points to multiple economic and technical factors that may impede the growth of the cryptocurrency domain.
Current Market Supports and Potential Hurdles
The exchange’s analysts, David Duong and David Han, acknowledge the positive impact of the demand for Bitcoin spot ETFs in the US. However, they caution that the momentum from short-covering has started to wane, potentially signaling a slowdown. They argue that unlike past trends, where liquidity was the main price driver, current market conditions suggest upcoming obstacles could dampen support and curtail further upward movement.
The analysts highlight the impending conclusion of the Bank Term Funding Program (BTFP) as a key concern. This Federal Reserve initiative was fundamental in offering stability to regional banks, and its withdrawal might reintroduce vulnerability into the financial system. Additionally, the report mentions that lower cash reserves among fund managers and quarterly rebalancing may restrict liquidity and affect market conditions.
Uncertain Future for Bitcoin’s Price Movements
Given these factors, Coinbase predicts Bitcoin’s trading to be confined to a limited range in anticipation of the next significant event, the fourth block reward halving in mid-April. The halving will slash miners’ rewards by half, potentially sparking market shifts. Yet, the analysts note that the rise of ETFs has altered historical market patterns, complicating any direct comparison to earlier halving events.
Furthermore, the study outlines a noticeable shift in investment strategies. The increase of Bitcoin holdings by ETFs is surpassing the rate of new coins mined, a trend possibly indicating a new investment landscape for the cryptocurrency. This shift adds a layer of complexity to Bitcoin price analysis and forecasting the effects of events like the upcoming halving.