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Bitcoin’s Recent Weakness Is More Tied to Global Markets Than to Anything Crypto Specific, Coinbase Says

May 2, 2024
  • Both equities and gold have fallen along with bitcoin, the report noted.
  • Coinbase said bitcoin’s recent pullback was below its historical range.
  • The cryptocurrency’s price discovery still remains rooted in global demand trends, the note said.
As an experienced financial analyst, I believe that Bitcoin’s (BTC) recent price decline is not indicative of sector-specific issues within the crypto market. Instead, it appears to be a reflection of broader market trends, including a strengthening dollar and declining equities and gold prices.In a research report published on Friday, Coinbase stated that Bitcoin’s (BTC) current vulnerability isn’t unique to the cryptocurrency market, implying that it doesn’t necessarily signal industry-wide surrender.

Coinbase observes that equities and gold have been decreasing in value since reaching their peaks in mid-April, amidst a surging US dollar. In April, Bitcoin experienced its most significant monthly decrease of 16% since the previous June.

Analysts David Han and David Duong expressed optimism about the current pullback in Bitcoin’s price, as the cryptocurrency’s maximum decline from its peak was only 23%. This is below the historical average for such declines.

The authors are convinced that the downward price swings in Bitcoin (BTC) will continue to decrease, largely due to BTC being recognized as a significant asset in macroeconomic terms. This notion has been strengthened by the introduction of Bitcoin ETFs in countries like the United States, Canada, Europe, Hong Kong, and pending applications in Australia.

International ETF inflows might not reach the volumes experienced in the United States, but we believe these investments serve as a significant indication for global regulators to engage with this asset class.

The largest Bitcoin spot ETF, Blackrock’s iShares Bitcoin Trust (IBIT), broke its 70-day streak of inflows and recorded its first outflow on Wednesday. This suggests a decrease in investment capital flowing into the asset class through this particular product. However, it is important to note that ETFs do not solely influence the price discovery of Bitcoin, as there are also highly liquid markets for Bitcoin trading on centralized exchanges (CEXs).

As a crypto investor, I’ve noticed an intriguing disparity between the trading volumes of cryptocurrency exchanges (CEXs) and U.S. spot Bitcoin ETFs during the first quarter of 2024. The average weekday spot volume on CEXs amounted to an impressive $18.8 billion, which is more than eight times greater than the $2.3 billion daily trading volume of U.S. spot Bitcoin ETFs over the same period. This significant difference in activity reinforces my belief that the price discovery for Bitcoin remains anchored in global demand trends rather than being driven primarily by the ETFs.

The discrepancy between using U.S. ETF inflows as an indicator for global price discovery is particularly evident when it comes to gold, according to Coinbase’s assessment. Despite a $3 billion net outflow in 2024 from the largest gold ETF in the U.S., the SPDR Gold Shares, the precious metal has still seen a 12% increase in value year-to-date.

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2024-05-03 17:43