Bitcoin and the entire cryptocurrency market have faced significant challenges in recent months. However, analysts at Coinbase, one of the leading cryptocurrency exchanges, are now predicting a bright future for the crypto industry in the second quarter of 2024. This positive outlook comes as Bitcoin experiences a market recovery, with a 3.31% gain in the past week, reaching a trading price above $43,000.
In their weekly report, Coinbase analysts analyze the factors that have put downward pressure on Bitcoin and identify a shift in the market dynamics. The completion of GBTC’s liquidations by defunct exchange FTX and the recovery of certain crypto entities from bankruptcy indicate a changing landscape for BTC.
The Coinbase analysts also point out the stable performance of the Bitcoin spot ETF market in the past week. Average daily net inflows of $200 million and a daily trading volume of $1.35 billion demonstrate a steady and positive trend. However, they anticipate that macroeconomic factors will soon gain more influence in the crypto market.
One significant development that could impact the market is the US Federal Reserve’s decision to postpone the discussion on scaling back its quantitative tightening (QT) until the next Federal Open Market Committee (FOMC) meeting in March. The analysts predict that the easing cycle will begin on May 1, with measures such as lowering interest rates to stimulate economic activity. Furthermore, they expect the Fed to halt its balance sheet reductions by June, further supporting the US economy.
The Impact of Anodyne Policies
The Coinbase analysts speculate that the Fed may consider implementing the end of balance sheet reduction simultaneously with rate cuts. They base this prediction on the tendency for policymakers to implement “anodyne” policies in an election year. According to Coinbase, the US apex bank will likely cut interest rates by 100 basis points, 25bps more than the Fed’s expectation for future rates, equivalent to a 1% decrease.
A reduction in interest rates is generally seen as a positive sign for the digital asset ecosystem. It allows investors to pay lower borrowing fees, freeing up more funds to invest in risk assets such as cryptocurrencies. Taking into account these factors, along with any “idiosyncratic” factors like the Bitcoin halving, the Coinbase analysts predict that BTC and other tokens will serve as favorable additions to investment portfolios in Q2 2024.
As of now, Bitcoin is trading at $43,077.76, registering a 0.20% gain in the last 24 hours. The daily trading volume has decreased by 15.45%, amounting to $16.78 billion. With a market cap of $844.85 billion, Bitcoin remains the largest cryptocurrency globally.
While Coinbase analysts point out the positive indicators and make predictions for the crypto market in Q2 2024, it is important to conduct independent research and consider all risks before making any investment decisions. The cryptocurrency market can be volatile, and investing always carries inherent risks. The information provided in this article is for educational purposes only and does not reflect the opinions of NewsBTC.
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