Many factors could improve the crypto market in the second quarter. However, Coinbase head of research David Duong said in a recent post that the positive effects may not be evident until late April.
“In our view, the setup for Q2 2024 appears to be more favorable for cryptocurrency performance. That said, these positive factors will become more evident from the second half of April onwards. We think it has the potential to become,” Duong said.
According to Duong, the crypto market has remained surprisingly stable despite recent US holidays and corporate financial adjustments. But he expects investors to sell their holdings as tax season approaches, potentially causing prices to fall.
Duong suggests that recent market volatility is due to speculative trading strategies focused on “short MicroStrategy trades and long Bitcoin trades.” On the bright side, he believes many of the concerns identified earlier this month appear to have eased. This could create a more favorable environment for the cryptocurrency market.
Duong's analysis also points to the dynamics of Bitcoin demand and supply based on two key events: the halving event and the vetting process for new financial products such as the Spot Bitcoin ETF. Specifically, he believes that demand for Bitcoin could increase once the review period for spot Bitcoin ETFs by major financial institutions ends and institutional investors continue to show interest.
“On the demand side, the 90-day review period that many news agencies use when conducting due diligence on new financial products such as Spot Bitcoin ETFs could end as early as April 10th. Yes,” Duong said. “We believe this could free up significant capital for US-based spot Bitcoin ETFs in the medium term.”
“Meanwhile, the level of leveraged short positions in CME Bitcoin futures suggests that institutional interest in the space remains elevated, according to the CFTC, as of March 19, according to the CFTC. “The number of tickets sold reached a record high of 19,917 tickets,” Duong added.
On the supply side, the halving event is expected to impact supply dynamics by reducing the proportion of new Bitcoins entering the market. If demand is stable or increasing, the price of Bitcoin could potentially rise.
