In a recent research report, Coinbase noted that Bitcoin (BTC)'s recent weakness is tied to global markets rather than anything specific to the crypto sector. Bitcoin, the world's largest cryptocurrency, fell 16% in April, recording the biggest monthly decline since June 2022.
Coinbase noted that both stocks and gold have traded lower since reaching highs in mid-April against the backdrop of a strengthening dollar. This shows that Bitcoin's recent weakness is not specific to crypto markets and is not indicative of a sector-specific capitulation.
Despite the pullback, Coinbase remains optimistic. “What makes us optimistic about this pullback is that BTC's maximum decline from the peak is below its historical range at 23%,” analysts David Han and David Duong wrote.
The authors believe that the overall downward trend will continue, in part due to BTC being legitimized as a macro asset. This is reinforced by spot ETFs in the US, Canada and Europe, as well as the recent launch of ETFs in Hong Kong and new applications in Australia.
While overseas ETF inflows are not as large as those seen in the US, “we think they represent an important signal for regulatory engagement in the asset class globally,” the report said.
Blackrock's iShares Bitcoin Trust (IBIT), the largest spot Bitcoin ETF, made its debut on Wednesday, ending a 70-day streak of entries. While this may indicate a slowing of capital inflows into the asset class through its ETF product, Coinbase believes ETF flows are only driving a portion of BTC price discovery given the global and highly liquid markets on centralized exchanges (CEX).
“Average weekday spot volume on CEXs in the first quarter of 2024 was $18.8 billion, more than eight times the $2.3 billion daily volume of U.S. spot ETFs during the same period,” the note said. This discrepancy in activity leads Coinbase to believe that BTC's price discovery is still based on global demand trends.
*This is not investment advice.