Pre-halving weakness continued to impact price action across the cryptocurrency market on Wednesday, with Bitcoin facing significant downward pressure.
Data from the Bitpush terminal showed that after Bitcoin hit a high of around $65,540 in the early morning of the Eastern Time Period, it continued to fall throughout the trading day, hitting a low of $59,640 (a figure that fell 18% from the peak in March), and then rebounded slightly to above $60,000. As of the time of writing, the trading price was $61,434, down 3.1% in 24 hours.
The altcoin market was under pressure earlier in the day, rebounding in the afternoon, with mixed performance, with the top 200 tokens by market cap rising and falling. Among them, Injective (INJ) led the gains, rising 14.8% to $27.93, Book of Meme (BOME) rose 14.2%, and Sui (SUI) rose 12.3%. Mantra (OM) fell the most, falling 11.4%, followed by Saga (SAGA) falling 10.1%, and Echelon Prime (PRIME) falling 9.4%.
The overall cryptocurrency market cap is currently $2.24 trillion, with Bitcoin’s dominance rate at 53.6%.
U.S. stocks opened higher and ended lower as traders assessed the risks posed to the market by the conflict in the Middle East. Uncertainty over the timing of rate cuts also made investors hesitant to increase exposure to risky assets, leading to further weakness. By the close, the S&P, Dow Jones and Nasdaq all fell, down 0.58%, 0.12% and 1.15% respectively.
Have institutional investors stopped buying Bitcoin?
Stockmoney Lizards analysts said in the X post that more downside moves in Bitcoin are in line with the Wyckoff analysis method.
As shown in the chart below, Bitcoin’s recent price rise and fall resembles trends typically seen during the formation of the Wyckof Distribution model, and as of April 17, BTC has entered the “signs of weakness” phase of the pattern.
This phase indicates that demand is weakening, which in turn causes the asset to fall. StockMoney Lizards believes that in the case of Bitcoin, the lack of demand is due to the growing risk aversion caused by the Federal Reserve's long-term higher interest rate policy and the escalating Iran-Israel conflict.
The analysts believe that “large institutions have paused buying for now,” adding: “ETF inflows are at an all-time low. Our guess is that they sense that difficult times may be coming for the market.”
Data from Farside Investors shows that U.S. spot Bitcoin ETFs have seen outflows of nearly $150 million since the outbreak of the Iran-Israel conflict on April 12.
Stronger dollar = weaker crypto
The weakness in Bitcoin and broader financial markets comes as the U.S. dollar has experienced its best five-day gain since February, gaining more than 2% since April 10. As of this writing, the U.S. Dollar Index DXY is trading at 106.23, its highest level since November 2.
Historically, higher interest rates have led investors to buy higher returns on U.S. Treasuries and time deposits, increasing demand for the dollar, which is reflected in the recent rise in the U.S. dollar index.
Market analyst Bitcoin Schmitcoin wrote on the X platform that the DXY index is moving in the opposite direction to the crypto market.
He believes: “Crypto bull = DXY bear; crypto bear = DXY bull; crypto top = DXY bottom; crypto bottom = DXY top, while DXY is consolidating, it is an indicator of crypto/stock volatility.”
This begs the question: will the halving become a sell-off news event?
Bitcoin Schmitcoin said: "We are seeing a possible top forming in major stock markets, while USD gold is showing tremendous strength after clearing a decade-long consolidation. All of this suggests that we are starting to see investors turn to hedging mechanisms to deal with macro uncertainty. DXY broke out because people are looking for cash instead of assets. People are buying gold because they are hedging. This is not a good sign. As much as I want to be bullish on BTC, I really have a hard time staying in this bullish camp. Mark my words: if the US dollar index starts to rise, everything else will fall because of it."
Bitcoin halving price reaction may not be immediate
With only two days left until the 2024 Bitcoin halving, cautious investors are choosing to wait and see whether the BTC price will retreat again or rebound sharply.
Coinify CEO Rikke Staer said in a report that Bitcoin’s price reaction to the upcoming halving could take several months and replicating the large percentage gains observed in the past could be challenging.
“Price reactions are not usually immediate, and historically, the main growth after the halving occurs within 6-18 months,” he said. “As the market size increases, larger price fluctuations become statistically less likely.”
Staer added that the huge percentage gains observed in previous halvings may be difficult to replicate due to the current size and liquidity of the Bitcoin market.
