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The US-based giant cryptocurrency exchange Coinbase, in a recently published report, highlighted that despite reaching an all-time high, Bitcoin (BTC) and the rest of the crypto market are facing headwinds from macroeconomic factors and negative technical indicators.
Factors That Could Change Market Dynamics
Coinbase analysts David Duong and David Han noted in the report that demand for spot Bitcoin ETFs in the US continues to provide support, yet the strength of the initial upward movement caused by short selling appears to be showing signs of exhaustion.
In previous cycles, liquidity conditions were the primary driver of price momentum, but the current outlook suggests a different scenario. The report emphasizes that in the coming weeks, support factors for the crypto market are expected to encounter significant macro and technical barriers, which could potentially limit further gains.
One of the upcoming negative changes mentioned in the report is the ending of the Bank Term Funding Program (BTFP) initiated by the Fed last year. The termination of this program, which supports regional banks in the US, is expected to end the arbitrage opportunity for banks and potentially reintroduce fragility into the financial system.
The report also suggests that a decrease in cash reserves among fund managers, combined with quarter-end rebalancing, could result in tied-up liquidity and further impact market dynamics.
Predictions of Bitcoin Trading in a Narrow Range
All these balancing dynamics lead Coinbase to predict that Bitcoin will trade within a narrow range until the next major event, the 4th block reward halving expected to occur in mid-April.
On the other hand, the four-year block reward halving, which will reduce the mining reward per block by 50% for miners, is expected to cause unique changes in the market. However, Coinbase analysts note that the emergence of exchange-traded funds (ETFs) has altered Bitcoin’s market dynamics and made direct comparisons with previous block reward halving cycles difficult.
According to the report, the cumulative net growth of BTC held by ETFs significantly outpaces that produced by miners, indicating a shift in the investment outlook for Bitcoin. This change in market behavior makes the analysis of Bitcoin’s price movements and the potential impacts of future events like block reward halvings even more complex.
