The latest Coinbase (COIN) report touched on the issues that although Bitcoin (BTC) has reached an all-time high, cryptocurrency markets may face macroeconomic headwinds and negative technical factors in the short term, potentially limiting further gains.
Coinbase Report Warns of Short-Term Challenges for Crypto Market
Analysts David Duong and David Han underlined that although the initial rise was fueled by a short-term move, this momentum now appears to be waning.
However, they noted that US spot Bitcoin ETFs continue to play an important role in sustaining demand for Bitcoin.
Historically, liquidity conditions have been an important factor affecting price momentum in previous cycles.
However, the report suggests that this may no longer be the case. Despite positive factors such as spot ETF inflows, these factors are expected to face significant macroeconomic and technical hurdles in the coming weeks.
The Federal Reserve is expected to allow the Bank Term Funding Program (BTFP) to expire on March 11, potentially closing an arbitrage opportunity for banks, the report said. However, this move may bring new vulnerabilities to the financial system.
The report also emphasized that quarter-end rebalancing, as well as a possible decrease in fund managers' cash reserves, could limit liquidity in the market.
In light of these stabilizing dynamics, Coinbase suggested that Bitcoin is likely to trade in a narrow range until the next major event, the Bitcoin halving in mid-April.
The reward halving event, held every four years, will reduce Bitcoin mining rewards by 50%.
The report also highlighted the changing dynamics of the Bitcoin market due to the introduction of exchange-traded funds (ETFs).
Coinbase noted that examining previous halving cycles may now be less useful, as the cumulative net growth in BTC held by ETFs exceeds that produced by miners by a factor of nearly three.
*This is not investment advice.
