Is Bitcoin’s Rally Over? Leverage Drops As Halving Highs Fade: Report
April 25 2024 - 12:00PM
NEWSBTC
Recent trends in the crypto market have indicated a notable shift
in trader behavior, particularly among those investing in Bitcoin.
Using data from CryptoQuant, Bloomberg has revealed that the
Bitcoin funding rate—the cost for traders to open long positions in
Bitcoin’s perpetual futures—has turned negative for the first time
since October 2023. This change suggests a “cooling interest” in
leveraging bullish bets on Bitcoin, coinciding with the fading
impact of major market drivers. Related Reading: Is A $72K Bitcoin
Surge On The Horizon? Glassnode’s Latest Analysis Points To An
Answer Bitcoin Market Dynamics Post-Halving The decline in
Bitcoin’s funding rate correlates with a reduction in net inflows
to US spot Bitcoin Exchange-Traded Funds (ETFs), which previously
pushed the cryptocurrency to record highs. Despite the anticipation
surrounding the Bitcoin Halving—an event reducing the reward for
mining new blocks and theoretically lessening the supply of new
coins—the price impact has been surprisingly muted. According to
Bloomberg, this subdued response has compounded the effects of
broader economic factors, such as geopolitical tensions and changes
in monetary policy expectations, leading to increased risk aversion
among investors. Following the latest Bitcoin halving, the market
has not seen the bullish surge many expected. Instead, Bitcoin has
only seen a correction of over 10%, from its all-time high (ATH) in
March with prices stabilizing in the $63,000 region, at the time of
writing. As CryptoQuant’s Head of Research Julio Moreno pointed
out, the recent downturn in Bitcoin’s funding rates to below zero
underscores a “decreased eagerness” among traders to take long
positions. According to Bloomberg, this trend is supported by a
significant drop in daily inflows to US spot Bitcoin ETFs and a
reduction in open interest in Bitcoin futures at the Chicago
Mercantile Exchange (CME), which indicates a broader cooling of
enthusiasm for crypto investments. [1/4] Bitcoin ETF Flow – 25
April 2024 – UPDATE pic.twitter.com/ojRayOFlnu — BitMEX Research
(@BitMEXResearch) April 25, 2024 In a Bloomberg report, K33
Research analyst Vetle Lunde noted that the “current streak of
neutral-to-below-neutral funding rates is unusual,” suggesting that
the market might be entering a price-consolidation phase. Notably,
this period of reduced leverage activity could potentially lead to
further price stabilization, but it also raises questions about the
near-term prospects for Bitcoin’s recovery. Adjustments In Mining
Difficulty And Market Implications Interestingly, alongside these
market adjustments, Bitcoin’s mining difficulty has increased for
the first time immediately following the fourth halving. The
difficulty adjustment, which occurs every 2016 block, increased by
2%, reaching a new high of 88.1 trillion, according to Bitbo data.
This adjustment contradicts past trends where the difficulty
typically decreased post-halving due to reduced profitability
pushing less efficient miners out of the market. This anomaly in
mining difficulty suggests that despite lower rewards post-Halving,
miners remain active, possibly buoyed by more efficient mining
technologies or strategic shifts within mining operations. Related
Reading: Samson Mow On Bitcoin Halving: Brace For Supply Shock,
Omega Candle In Sight This resilience in mining activity could help
sustain the network’s security and processing power. Still, it
reflects the complexities of predicting Bitcoin’s market dynamics
solely based on historical halving outcomes. Featured image from
Unsplash, Chart from TradingView
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