Downside pressure on Bitcoin and the broader cryptocurrency market is starting to dry up, which could lead to a more supportive trading environment, according to Coinbase analysts.
Coinbase’s weekly market report released on Friday outlined how certain technical factors that were putting downward pressure on Bitcoin in particular and the broader cryptocurrency market have begun to weaken.
“Many of the technical factors driving cryptocurrency performance downward are starting to dissipate, which could lead to a more supportive trading environment in the coming weeks,” Coinbase analysts said.
According to the report, one significant development that has relieved much of the downward pressure is the completion of FTX’s bankruptcy estate, which involves selling off significant GBTC holdings. Coinbase analysts referenced a recent CoinDesk report that cited the sale of 22 million shares of GBTC stock as a reason for the bankruptcy.
Macro factors become more relevant
To strengthen the argument that a more friendly trading environment is starting to develop, the report also notes that net inflows into U.S. spot Bitcoin ETFs have averaged more than $200 million per day over the past week, bringing total net inflows to $1.46 billion since January 11. He added that it amounted to several dollars.
“As a result, we expect macro factors to become more relevant for digital asset classes in the coming weeks, which could support performance,” the analysts said.
Possibility of interest rate cut in May
Coinbase reports that the U.S. Federal Reserve (Fed)’s recent interest rate decision press conference announced that the central bank’s quantitative tightening program will be postponed to the next Federal Open Market Committee meeting on March 19-20. Content was emphasized. Coinbase said this suggests the Fed’s monetary easing cycle could begin on May 1 and the central bank’s balance sheet reduction plan could end in June.
The report said the Federal Reserve’s interest rate announcement speech on Wednesday hinted that the likelihood of a soft landing for the U.S. economy has increased after the central bank’s latest cycle of rate hikes.
“In the U.S., the likelihood of a soft landing appears to be higher than it was a few months ago. On the surface, the economy is making minimal trade-offs between activity and inflation. Core PCE inflation, the Fed’s preferred measure of prices, is 2.7% per year. – Year-over-year trend is consistent with our long-term target of 2% and the assortment of recent economic indicators has been quite resilient,” Coinbase analysts said.
The report added that waning downward pressure on Bitcoin, combined with the possibility of interest rate cuts following Bitcoin halving, “could potentially support both Bitcoin and other tokens in the second quarter of 2024.”
The world’s largest cryptocurrency by market capitalization rose 1.5% over the past 24 hours to $43,126 at 11:36 PM ET, according to The Block’s pricing page.
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