Category: Interest Rates

Analysts at cryptocurrency exchange Coinbase are backing Bitcoin and the entire crypto market to put up a significantly positive performance in Q2 2024. This development comes as BTC continues its market recovery, gaining by 3.31% in the last week to trade above $43,000. 

Downward Pressure On Bitcoin Subsides, Macro Factors To Come Into Play: Analysts

In the Coinbase weekly report on Friday, the American exchange’s analysts noted that the market factors that induced downward pressure on Bitcoin were being phased out. This claim is backed by the completion of the GBTC’s liquidations by defunct exchange FTX as well as the recovery of certain crypto entities from bankruptcy, indicating a change in the dynamics of the BTC market. 

Furthermore, the analysts also highlighted the stable performance of the Bitcoin spot ETF market in the last week, marked by average daily net inflows of $200 million and a daily trading volume of $1.35 billion in the last week. However, in the coming weeks, Coinbase market experts have predicted the macroeconomic factors to gain more influence in the crypto market. 

In particular, the analysts made reference to the US Federal Reserve’s decision to postpone the deliberation on scaling back its quantitative tightening (QT) to the next Federal Open Market Committee (FOMC) meeting in March. Based on this development, they predict the easing cycle will begin on May 1, which typically involves measures such as lowering interest rates to make loans cheaper and stimulate economic activity. In addition, they anticipate the Fed to start halting its balance sheet reductions by June to further support the US economy. 

Interestingly, they believe the Fed could consider implementing the end of the balance sheet reduction at the same time with rate cuts. Based on the “anodyne” policies policymakers implement in an election year, Coinbase analysts predict the US apex bank will cut interest rates by 100 basis points (bps) – 25bps more than the Fed’s expectation for future rates – which is equivalent to lowering rates by 1%. 

Generally, a reduction in interest rates is a positive omen for the digital asset ecosystem as it allows investors to pay low borrowing fees, accumulating more funds to invest in risk assets such as crypto tokens. Based on the multiple factors listed above combined with “idiosyncratic” factors, such as the Bitcoin halving, the analysts at Coinbae predict BTC, alongside other tokens, will serve as favorable portfolio additions in Q2 2024. 

Bitcoin Price Overview

At the time of writing, Bitcoin trades at $43,077.76 with a 0.20% gain in the last day. Meanwhile, the asset’s daily trading volume is down by 15.45% and is valued at $16.78 billion. With a market cap of $844.85 billion, BTC continues to rank as the largest cryptocurrency in the world.