Coinbase Report: Crypto Market May Face Short-Term Challenges

Despite positive factors from spot ETF entries, the cryptocurrency market may encounter significant macro and technical challenges, according to a report from Coinbase.

In a report released on Friday, Coinbase (COIN) suggests that Bitcoin (BTC), even as it sets a new all-time high, could face short-term macro challenges and negative technical factors, limiting future gains.

Analysts David Duong and David Han state in the report that the “short-covering move contributing to the initial upward momentum has now exhausted, but U.S. spot Bitcoin ETFs still serve as a meaningful core for Bitcoin demand.”

In previous cycles, “liquidity conditions” were the main barrier to price momentum, but the situation is said to be different now. Nevertheless, the report notes that these supportive elements are likely to face “some significant macro and technical challenges in the coming weeks.”

The expiration of the Bank Term Funding Program (BTFP), used to support U.S. regional banks, is expected on March 11 by the Federal Reserve. The report says, “This could close an arbitrage opportunity for banks but may lead to renewed weaknesses in the financial system.”

Additionally, the note mentions that fund managers, along with a decrease in cash reserves, could tie up liquidity with end-of-quarter rebalancing.

Due to these balancing dynamics, Coinbase stated that the highest probability scenario for Bitcoin is to trade within a narrow range until the idiosyncratic event of the Bitcoin halving in mid-April. The halving, occurring every four years, will reduce Bitcoin mining rewards by 50%.

Coinbase also notes that the introduction of exchange-traded funds (ETFs) has altered Bitcoin’s market dynamics, rendering the analysis of previous halving cycles useless. The report concludes by stating, “The total net growth of BTC held by ETFs has nearly tripled what miners produce.”

Please note that this summary is based on the information provided in the mentioned report and does not constitute financial advice.

source: prepared by Melisa Beğiç

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