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The global cryptocurrency giant Bitcoin saw a momentary drop below $60,000, marking the first time it has fallen below this critical support level in over a month, after hitting a historic high above $73,000 in March this year. However, ahead of a major blockchain software update known as the "Bitcoin halving event," risk appetite in the crypto market sharply declined, exacerbating Bitcoin's volatility. Historically, the Bitcoin halving event has been hailed as one of the core factors driving the significant upward trend in cryptocurrency.
The price of Bitcoin, the world's largest cryptocurrency asset, dropped by 5% in the early hours of April 18th to $59,888, before narrowing its decline, now hovering around $61,600. Since reaching a record high of $73,797 on March 14th, the price of Bitcoin has dropped significantly by about 18%. Other relatively smaller cryptocurrencies, such as Ethereum, Solana, and Dogecoin, also experienced sharp declines on Wednesday, with their performance since the beginning of the year far less robust than that of Bitcoin. Stocks closely related to cryptocurrencies, including MicroStrategy (MSTR.US), Coinbase (COIN.US), and Marathon Digital (MARA.US), also saw significant declines in their prices.
According to the latest data from CoinMarketCap, as of last weekend, Bitcoin occupies nearly 55% of the total market capitalization of the cryptocurrency market, amounting to $2.4 trillion, the highest level since April 2021. Throughout the bullish year of Bitcoin in 2021, this largely reflects the strong demand for Bitcoin spot ETFs approved by the U.S. SEC, as well as the sharp decline in the market capitalization of smaller-scale tokens. By total market capitalization, Ethereum, stablecoin Tether, Binance Exchange's native token BNB, and Solana follow sequentially from second place.
The plummeting prices of cryptocurrencies like Bitcoin occurred ahead of the highly anticipated "Bitcoin halving," with the major update scheduled to take place as early as this Friday. This four-yearly event, known as the Bitcoin halving, is considered a positive catalyst for Bitcoin prices as it significantly reduces the supply of new tokens on the blockchain. However, investors have begun to worry whether the price of Bitcoin, which hit a historic high before, has already absorbed the positive impact of the halving, given the backdrop of diminishing expectations of a Federal Reserve rate cut and escalating geopolitical tensions, thus causing a sharp decline in risk appetite in the cryptocurrency market, which could trigger a prolonged plunge.
Nathanaël Cohen, co-founder of INDIGO Fund, said, "Investors are seeking to take on smaller risks because the halving will be a significant event affecting market trends, whether it will be a non-major event overshadowed by the ETF investment frenzy in the current environment, remains to be seen." "There is also a macro factor, that is, the tension in the Middle East has brought greater selling pressure on risk assets such as cryptocurrencies."
It is worth noting that last week, a wave of long positions in digital assets accelerated the decline in Bitcoin. About $780 million worth of bullish cryptocurrency bets were closed out in 24 hours last Friday. As tensions between Iran and Israel escalated, some cryptocurrency investors began to dislike risk assets, further driving down Bitcoin prices.
Bullish proponents argue that the scale of inflows into Bitcoin spot ETFs may drive a new bull market for Bitcoin.
However, some market participants still believe that despite the recent collapse of highly leveraged factors in cryptocurrencies, the long-term prospects for Bitcoin are still largely bullish under the impetus of Bitcoin spot ETFs.
Ravi Doshi, Head of Markets at FalconX, said, "FalconX's derivatives department continues to see long-term bullish buying interest, as our clients expect prices to soar in the second half of this year. The continued inflow trend of Bitcoin spot ETF funds has driven Bitcoin to reach a record high of $73,797 in mid-March this year. However, since then, stimulated by the cooling of profit-taking sentiment and the expectation of a significant reduction in the Federal Reserve's rate cut, the price of Bitcoin has fallen by about 18%, while an indicator measuring the performance of smaller-scale cryptocurrency asset categories has fallen by over 30%. In recent times, the expectation of loose monetary policy in the United States in the cryptocurrency market has noticeably cooled, and generally, the expectation of loose monetary policy may foster speculative cryptocurrencies, which are largely concentrated in smaller-cap cryptocurrencies.
The batch of U.S. Bitcoin spot ETFs launched three months ago by well-known issuers such as BlackRock Inc. and Fidelity Investments has accumulated a total ETF asset size of about $56 billion, making it one of the most successful debut products in the ETF asset category's history.
JMP Securities, a well-known investment institution on Wall Street, stated in a recent research report that over the next three years, Bitcoin spot ETFs tracking Bitcoin (BTC) may see inflows of up to $220 billion in scale, meaning that if a multiplier is applied to calculate new capital, the price of Bitcoin may double to $280,000.
"While the scale of inflows into Bitcoin spot ETFs has exceeded our expectations, reaching $10 billion just two months after its launch," analysts at JMP Securities emphasized in the report, "The current level of activity and flow of funds may still be just the tip of the iceberg." And added that the flow of funds will continue to grow significantly, as the formal approval of U.S. Bitcoin spot ETFs is just the beginning of a "longer-term capital allocation process."
Benjamin Celermajer, Managing Director of Magnet Capital, a digital asset investment management company, said that institutional investors' widespread allocation to U.S. Bitcoin spot ETFs has resulted in Bitcoin's performance relative to other crypto markets being very strong. |
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Post time 22-4-2024 12:28:42