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Coinbase says that the future direction of digital asset markets, especially after the Bitcoin halving event, is more likely to be influenced by macroeconomic conditions than by the fundamentals of cryptocurrencies alone. Released on Thursday, the report signals a pivotal shift in the factors influencing Bitcoin’s price dynamics.
Digital Asset Market Will Be Impacted by “Exogenous” Factors, Coinbase Says
David Han, a Coinbase analyst, highlighted that external elements such as geopolitical tensions, enduring high interest rates, reflationary trends, and growing national debts are increasingly critical. “These factors are largely exogenous to crypto,” Han noted, emphasizing their impact on the broader digital asset market.
The analysis also underscored the increased correlation between altcoins and Bitcoin, which Han interprets as confirmation of Bitcoin’s central role within the cryptocurrency landscape. “BTC’s anchor role in the space even as BTC firms its position as a macro asset,” Han stated.
Since Bitcoin is mathematically designed to be more scarce, historically it has gotten more valuable over time. Less is more. #Bitcoin Source: @ResearchGate pic.twitter.com/XEBVYdmomG — Coinbase 🛡️ (@coinbase) April 18, 2024
While Bitcoin halvings — the events that slash the rate of new Bitcoin creation by half — have typically heralded the start of bull markets, Coinbase suggests that these bullish phases were also supported by other catalysts within the crypto ecosystem.
The upcoming halving, expected to take place late tonight or early tomorrow UTC, will reduce the growth rate of Bitcoin’s supply by 50%. Traditionally seen as a “risk on” asset class, Bitcoin’s continued resilience and the approval of spot exchange-traded funds (ETFs) have cultivated a split in its investor base. This includes those who view Bitcoin as merely speculative and others who regard it as ‘digital gold,’ a safeguard against geopolitical instability.
Reduced Market Volatility and Goldman Sachs’ Caution
According to the report, this dual view of Bitcoin, as both a speculative venture and a macroeconomic safeguard, has contributed to smaller downturns in this cycle compared to previous ones. Goldman Sachs, another Wall Street heavyweight, shared a similar perspective in a report last week. It urged caution in assuming that past halving events would mirror future ones, given the prevailing macroeconomic conditions, pointing to a broader recognition among financial analysts of the intricate link between economic factors and cryptocurrency movements.
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