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The analyst notes that many challenges identified earlier this month seem to be fading.
Numerous factors could improve the crypto market in Q2; however, positive effects might not be evident until the latter half of April, said David Duong, Coinbase Head of Research, in a recent post.
“The setup for 2 Q24 appears more conducive for crypto performance, in our view. That said, we think those positive factors may only manifest themselves more clearly starting in the second half of April,” stated Duong.
According to Duong, despite recent US holidays and corporate financial adjustments, the crypto market has shown surprising stability. However, he anticipates that the approaching tax season might lead investors to sell their holdings to pay taxes, potentially causing a price drop.
Duong suggests the recent market volatility is attributed to speculative trading strategies focused on “short MicroStrategy vs long bitcoin trade.” On the bright side, he believes that many concerns identified earlier this month seem to be lessening. This could create a more favorable environment for the crypto market.
Duong’s analysis also points to Bitcoin supply-demand dynamics based on two key events: the halving event and the review process for new financial products like spot Bitcoin ETFs. Specifically, he thinks that the conclusion of the review period for spot Bitcoin ETFs by major financial institutions, coupled with continued institutional interest, could boost demand for Bitcoin.
“On the demand side, the 90-day review period that many wirehouses employ when conducting due diligence on new financial offerings – like spot bitcoin ETFs – could conclude as early as April 10,” stated Duong. “We think this could yet unlock significant capital for US-based spot bitcoin ETFs over the medium term.”
“Meanwhile, it seems like institutional interest in this space remains elevated based on the level of leveraged short positions in CME bitcoin futures, which has climbed to a record high of 19,917 contracts as of March 19, according to the CFTC,” added Duong.
On the supply side, the halving event is expected to impact supply dynamics by reducing the rate of new Bitcoin entering the market. If demand remains steady or grows, the price of Bitcoin could potentially increase.
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