Will the cryptocurrency market continue to be positive in Q2?

However, the positive effects may not be evident until the second half of April, David Duong, Coinbase's director of institutional research, said in a recent post.

'The second quarter of 2024 looks more favorable for the cryptocurrency market but positive factors are only evident starting from the end of April'.

Despite the recent US holidays and corporate finance adjustments, the cryptocurrency market has still shown surprising stability. However, Duong predicts that the approaching tax season could prompt investors to sell their holdings, potentially driving prices down.

According to Duong, the recent market volatility is due to speculative trading strategies focusing on 'Short MicroStrategy and Long Bitcoin trading'. On the positive side, he believes that many of the concerns identified earlier this month appear to have subsided, possibly creating a more favorable environment for the cryptocurrency market.

Duong's analysis also points to Bitcoin supply-demand dynamics based on two main events: halving and the review of new financial products such as Bitcoin spot ETF. Specifically, he suggested that the end of the review period for spot Bitcoin ETFs by major financial institutions, coupled with continued institutional interest, could boost demand for Bitcoin.

'On the demand side, the 90-day review period that many wirehouses use when conducting due diligence on new financial services, such as Bitcoin spot ETFs, could end as early as April 10. We think this is still unlikely to free up significant capital for US-based spot Bitcoin ETFs in the medium term.'

'Meanwhile, it appears that institutional interest in this space remains elevated based on the level of leveraged short positions in CME Bitcoin futures, which have increased to a record high of 19,917 contracts as of March 19, according to CFTC'.

On the supply side, the halving event is expected to impact supply dynamics by reducing the rate of new Bitcoin entering the market. If demand remains stable or grows, the price of Bitcoin could increase.

Kareem Winters

Update 04 April 2024