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A recent research conducted by Coinbase said the market is poised for a positive second quarter despite the recent corrections that saw Bitcoin retrace to $65,000 on April 2, 2024.
The entire crypto market dropped over 5% on Tuesday, now valued at $2.48 trillion, according to CoinMarketCap data. However, despite the decline, Coinbase research believes the industry is set to rebound in Q2 as most of the previously identified headwinds are over, and the positive factors are set to come into play.
Coinbase Is Bullish on Bitcoin Halving Impact
Coinbase attributed the potential surge to several factors, including the highly anticipated Bitcoin halving event scheduled for later this month, between April 16 and 20.
During the event, miners are expected to receive 3.125 BTC in rewards. The miners previously earned 6.25 BTC per block during the last halving event in 2020.
Coinbase analysts David Duong and David Han wrote in the research that the reduction in miners will help diminish Bitcoin supply, thereby positioning the market for positive returns in the coming quarter.
In terms of demand, the analysts pointed out that the 90-day review period used by wirehouses to conduct due diligence on new financial products, such as the spot bitcoin exchange-traded funds (ETFs), could be concluded as soon as April 10.
Coinbase analysts said that some wirehouses like LPL Financial have a three month observation period while other companies have even shorter or longer timeframes for reviewing new financial products.
However, the analysts believe the end of this review period could signal a significant shift in institutional interest in crypto investments and potentially open the gate for more capital inflow into US-based spot bitcoin ETFs over the medium term.
Asset Managers Accumulates 500,000 Bitcoins
The exchange highlighted that while wirehouses such as Morgan Stanley (MS), Bank of America (BAC), UBS (UBS), and Goldman Sachs (GS) are influential gatekeepers of wealth, they are not the sole entities in the wealth-management landscape in the United States.
According to the research, several other wealth-management platforms operate independently of these large financial institutions, suggesting that even if the larger wirehouses are cautious or slow to adopt new financial products like spot bitcoin ETFs, there are alternative channels through which significant capital could flow into the market.
Since the introduction of Bitcoin ETFs into the market in January, asset managers such as BlackRock, Fidelity Investments, Grayscale Investments, and others have accumulated 500,000 BTCs valued at $35 billion.
Institutional Interest Remains Elevated
The analysts also highlighted institutional interest in crypto investments as another factor that could drive the anticipated market surge in Q2 2024.
According to the report, institutional demand for digital asset investments remains elevated, as evidenced by the level of leveraged short positions in Chicago Mercantile Exchange (CME) bitcoin futures.
Futures trading on the stock exchange reached a record high of 19,917 contracts as of March 19, 2024. The figure is compared to the total open interest on CME bitcoin futures of 33,196 and contracts, equivalent to $10.5 billion.
The research also disclosed that the total value locked (TVL) in on-chain derivatives had reached an all-time high of $3.4 billion, even as the broader decentralized finance (DeFi) TVL remains about 50% off its previous cycle highs.
