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⚡Global Trends Weigh on Bitcoin🌏

Croxroad

05 May 2024 — 3 min read

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Coinbase, in a recent research report, has highlighted that Bitcoin's recent downturn is not confined to the crypto markets alone, suggesting it's not indicative of sector-specific capitulation. According to the report, both equities and gold have experienced declines alongside Bitcoin, against the backdrop of a strengthening dollar. Bitcoin saw a significant 16% decline in April, marking its largest monthly drop since June 2022.

Analysts David Han and David Duong underscored an optimistic perspective amid this pullback, noting that Bitcoin's maximum drawdown from its peak stands at 23%, which falls below its historical range. They emphasised their belief that this trend of reduced drawdowns will persist, partly due to Bitcoin's growing legitimization as a macro asset. This trend has been further reinforced by the introduction of spot exchange-traded funds (ETFs) in various regions globally, including the U.S., Canada, Europe, Hong Kong, and Australia.

While overseas ETF inflows might not match those seen in the U.S., Coinbase views them as significant signals of regulatory engagement with the asset class worldwide. Despite Blackrock’s iShares Bitcoin Trust (IBIT) experiencing its first outflow after a 70-day inflow streak, Coinbase suggests that ETF flows only contribute to a portion of Bitcoin price discovery, with the bulk rooted in global demand trends. The report highlights a notable discrepancy in activity between centralised exchanges (CEXs) and U.S. spot ETFs, indicating that Bitcoin's price discovery remains deeply tied to global demand dynamics.

🧘 Bitcoin Bulls Eye Relief

The recent sell-off in Bitcoin might be poised to slow down, as the year-over-year M2 money supply has turned positive for the first time since November 2022. This turnaround serves as a signal for investors to consider hedging against inflation, according to market analysts. Glassnode, a crypto analysis firm, noted a rise in Bitcoin net outflows across all cohorts throughout April, indicating consistent sell-side pressure across the board.

Despite Bitcoin experiencing a 9.75% drop in price over the past 30 days, trading at $59,586 at the time of writing, the positive flip in the M2 money supply on May 1 suggests an overall increase in money circulation. This uptick in money supply typically prompts investors to shift their focus to assets that tend to outperform during high inflationary periods. Historically, both the Bitcoin and crypto markets have exhibited stronger performance with a rise in the global M2 supply.

The positive shift in the M2 money supply has led to speculation among crypto traders regarding Bitcoin's price trajectory. Professional trader Oliver L. Velez expressed a bullish outlook, urging followers to capitalise on any market dips and dismiss pessimistic predictions. Similarly, crypto trading account InvestAnswers echoed the sentiment, signalling the potential for Bitcoin's price surge amid the anticipated growth in the M2 money supply. Raoul Pal, a prominent figure in the financial industry, previously highlighted the correlation between Bitcoin's performance and the global M2 supply, suggesting that Bitcoin tends to outperform traditional markets during such periods.

🍽️ Fork

A fork in the context of cryptocurrency refers to a significant change made to the underlying protocols governing a blockchain network. This alteration represents a departure from the previous version of the blockchain and can be categorised into two main types: soft forks and hard forks. Soft forks involve changes to the software protocol that remain backward-compatible, meaning older nodes can still interact with the network. On the other hand, hard forks are substantial modifications that necessitate all nodes to upgrade to the latest version of the software in order to remain compatible with the network.