Cryptocurrency exchange Coinbase has released a weekly report stating that the technical factors that have been pressuring Bitcoin and the broader crypto market are starting to become exhausted. Authored by David Duong, head of institutional research, and David Han, institutional research analyst, the report highlights that the liquidation of Grayscale Bitcoin Trust (GBTC) shares by FTX and other bankrupt entities is largely complete, significantly reducing selling pressure.
Signs of Technical Pressure Easing
The report notes that the selling of GBTC by defunct entities like FTX has been a major technical headwind for Bitcoin. With those sales winding down, the market is seeing a resurgence in demand for US spot Bitcoin ETFs. Over the past week, net inflows averaged more than $200 million daily, bringing total net inflows since January 11 to $1.46 billion, accompanied by healthy daily trading volumes of approximately $1.35 billion. This indicates sustained institutional interest.
Macro Factors Take Center Stage
Coinbase analysts believe that with technical pressure fading, macro factors will become the dominant driver for digital assets. “We expect macro factors to become more relevant for the digital asset class in the weeks ahead, which could be supportive for performance,” they said. The report also notes that the probability of a soft landing in the US economy has increased compared to a few months ago, as the economy shows minimal trade-offs between activity and inflation. The disinflationary trend is expected to persist. Coinbase projects the Federal Reserve will cut interest rates by 100 basis points this year, earlier than the 75 basis points implied by the dot plot and the nearly 150 basis points priced into Fed funds futures. The analysts expect rate cuts to begin in May, followed by a tapering of quantitative tightening soon after.
Halving and Rate Cuts: A Positive Setup
The timing of these monetary policy shifts coincides with the Bitcoin halving, expected in April 2024. “We expect rate cuts in the U.S. to start in May and the tapering of quantitative tightening soon after, coinciding with idiosyncratic events like the bitcoin halving and creating a positive setup for the asset class more broadly,” the report concludes. The combination of technical exhaustion, strong ETF inflows, macro tailwinds, and the supply shock from halving could provide a constructive backdrop for Bitcoin and the broader crypto market in the coming months.