Bitcoin is poised for another strong quarter, but fiscal and monetary policy could shake things up. Two widely predicted triggers will occur in the cryptocurrency market between April and June. One is Bitcoin's halving, which historically precedes a bull run to new highs. Then, after approving a Bitcoin ETF in January, the Securities and Exchange Commission made a decision regarding the Spot Ether ETF. However, the most important factor for Bitcoin and cryptocurrencies in the second quarter may be the Federal Reserve's decision to cut interest rates. “The fundamental reason why people buy [crypto] “The most important fundamental for the dollar may be the level of short-term interest rates set by the Fed,” said Zach Pandle, head of research at Grayscale Investments. He said it was a thing. Late last year, the Fed signaled that a rate cut was imminent, but inflation data have since picked up, raising questions about the timing of the cut. “If the Fed doesn't cut rates, I think we'll have to rethink a lot of the market's view. If the Fed does cut rates anyway, we'll see the first rate cut in June,” Pandle said, according to CME FedWatch Tools. will be carried out.” Bitcoin is on pace to end the first quarter up 66% year-to-date, according to Coin Metrics. , which rose 13% in March despite briefly falling 17% from its all-time high hit a few days earlier. Cryptocurrencies are traded 24 hours a day, 7 days a week. According to CoinGlass, the second quarter tends to be a strong period for Bitcoin, with seven of the past 11 years since the cryptocurrency's inception ending in the black. “I remain optimistic about the outlook,” Pandor said. “The basic scenario is a soft landing for the U.S. economy, the Fed cutting interest rates despite moderately steady inflation, and a controversial presidential election, which could pose further downside risks to the dollar depending on what candidates say and their positions we hear in the future. There is a “Quarter''. “I don't think what got us here has materially changed,'' he added. “The metrics we use to gauge levels within the bull market appear to be still in their infancy. We believe prices will still rise, perhaps in the second quarter.” Potential Demand Shocks March One of the factors that pushed Bitcoin to new records was the continued success of the Spot Bitcoin ETF, which was first launched in the US in January. According to CryptoQuant, demand has increased from 40,000 Bitcoins at the beginning of the year to 213,000 Bitcoins now, mainly due to ETF purchases ahead of the Bitcoin halving in late April. . Meanwhile, the supply of Bitcoin is already limited, and the halving (an event mandated by Bitcoin code that cuts Bitcoin mining rewards in half to limit supply) has not yet occurred. CryptoQuant estimates that the current Bitcoin sell-side liquidity inventory is sufficient to cover 12 months of demand at the current growth rate. If this continues, it could lead to a significant increase in Bitcoin price and volatility. “About 27,000 Bitcoins are issued every month, which is about 12% of monthly demand based on current demand growth rates,” said Julio Moreno, Head of Research at CryptoQuant. “After the halving, newly minted Bitcoin will only cover 6% of current demand. Of course, this assumes demand is this strong.” The past 3 in Bitcoin history The halvings sparked widespread attention, as each halving produced monster returns in the months that followed. Investors are watching to see how new demand through ETFs will impact prices this year. “Every time there's a halving, the supply is cut in half, so the supply will be cut in half again, but not as much as before,” Chris Kuiper, head of research at Fidelity Digital Assets, told CNBC. Told. “There is debate as to whether the impact is as big as before, or whether there was a larger impact because there was a supply shock during the last halving.”[There] “Maybe not as much of a supply shock this time, but I think there's a bigger demand shock this time,” he said, adding, “We'll see how the two play against each other.” “In the short term, a halving is a symbolic event at best. Halvings have been planned and widely talked about since Bitcoin’s creation in 2009, so halvings are a symbolic event at best. “I would be surprised if the day was a market-moving event.” “This is meant to be a reminder of Bitcoin's predictable monetary policy and how it contrasts with the uncertain outlook of fiat currencies. But the SEC's decision on whether to allow spot trading means it's “very likely” that the market will move on the Ether ETF, which is scheduled to trade in May. He added that while Fundl believes it will get the green light, the consensus from prediction market Polymarket is that it won't. Grayscale is one of several companies, including Fidelity and BlackRock, that are working with the SEC to seek approval to launch an Ether ETF. “Even if it's not priced in today, it could very well be a market-moving event if it were to happen,” he said. —CNBC's Ganesh Rao contributed reporting.
