Bitcoin Volatility Soars Amidst Geopolitical Tensions as Halving Approaches

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By Matteo Greco, Research Analyst at the publicly listed digital asset and fintech investment business Fineqia International (CSE:FNQ).

Bitcoin (BTC) wrapped up the week at approximately $65,650, registering a 5.3% decline from the previous week’s closing value of around $69,350. The week unfolded with notable volatility, particularly over the weekend, following a period of stability from Monday to Thursday. On Friday, BTC experienced a downturn, dropping to as low as $65,100, with the negative trend persisting into Saturday when it hit a weekly low of about $60,650 before rebounding and concluding the week around $65,650.

The weekend’s price drop was attributed to geopolitical tensions in the Middle East, with market sentiment improving after an announcement regarding a temporary halt in hostilities among the involved nations. Additionally, attention is focused on the upcoming halving, scheduled for the night between April 19th and 20th. While previous halving events have historically been followed by 9-12 months of uptrend, they have often triggered short-term “sell the news” reactions before and after the event.

The confluence of these factors likely contributed to the observed negative price action over the weekend. This short-term bearish sentiment is also reflected in the net outflow of $85 million from Bitcoin Spot ETFs during the week, signalling increased profit-taking and investor caution following the strong uptrend in both Q4 2023 and Q1 2024.

Despite the downturn, trading volumes remained robust, with BTC Spot ETFs recording a weekly trading volume of approximately $16.2 billion, averaging $3.2 billion per day. The cumulative trading volume since inception now stands at around $212 billion, with an average daily trading volume of approximately $3.3 billion.

BTC continues to demonstrate resilience compared to the broader digital assets market, with its dominance metric, that gauges the BTC market capitalisation in comparison to the whole digital assets market capitalisation, currently at 55.3%, the highest level since April 2021.

On the macroeconomic front, recent US inflation data surpassed expectations, leading to a shift in market participants’ rate cut projections for 2024. Initially, expectations were for a reduction of at least 75 basis points (equivalent to three 25-basis-point cuts) in interest rates. However, following the latest data, projections now anticipate 25/50 basis points cuts during the year, with the first cut expected in Q3 and a potential second cut towards year-end.

The continued presence of inflation levels surpassing central banks’ targets might result in a prolonged period of tighter monetary policy. This could further contribute to the short-term challenges faced by risk-on assets, as investors realign their portfolios in response to revised mid-term expectations influenced by the latest financial indicators.

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