Bitcoin Halving Analysts at Bitfinex are predicting that the price of Bitcoin could enter a period of consolidation for up to two months following the recent halving event. In their latest market report, Bitfinex noted that Bitcoin is likely to remain the price action benchmark for the crypto market in May and continue to be a leading indicator for the overall cryptocurrency market cap. Despite this, Bitfinex believes that Bitcoin is currently undervalued, with the Market Value to Realised Value (MVRM) ratio sitting at 2.21. This could present an entry point for investors, as historical patterns have shown significant returns when MVRV dips below its 90-day average.
Shift to Altcoins Post-Halving Bitfinex also highlighted a shift in investor focus towards altcoins following the halving event. Typically, post-halving periods see investors searching for higher returns in altcoins as opposed to Bitcoin. This shift in investment patterns is partly driven by a federal economic report indicating slower-than-anticipated growth in the US economy. The real Gross Domestic Product (GDP) annual rate dropped to 1.6 percent in the first quarter of 2024, down from 3.4% in the previous quarter, leading investors to explore alternative investment opportunities.
Macro Factors Influencing Bitcoin Bitfinex attributes the slowdown in the US economy’s growth to macroeconomic factors, particularly related to interest rates and inflation. Higher interest rates discourage investors from allocating funds to volatile assets like Bitcoin, favoring more stable options instead. The Federal Reserve’s key inflation gauge, the personal consumption expenditures (PCE) index, remained unchanged in March, indicating a stable 0.3 percent increase month-over-month. With year-on-year PCE at 2.7 percent, above the Fed’s 2% inflation target, fears of stagflation have resurfaced. Despite concerns, Bitfinex believes that the macroeconomic environment is more resilient than in previous years, potentially leading to a consolidation phase for Bitcoin prices over the next 1-2 months.
Altcoins Gain Traction Amid Bitcoin ETF Flows Dry Up Bitfinex’s analysis is further supported by the shift towards altcoins, as recent US Bitcoin spot ETF inflows have slowed down. Following the approval of Bitcoin ETFs by the SEC in January, inflows into these funds reached approximately $12 billion, boosting Bitcoin’s price to new all-time highs. However, momentum has waned since April, with investors turning to alternative cryptocurrencies. Market experts predict that ETF flows tend to decline if Bitcoin prices fail to sustain an upward trend, which has been the case since early March. The recent launch of Hong Kong Bitcoin Spot ETFs received underwhelming inflows, signaling investor hesitancy in the current market environment.
Future Outlook for Bitcoin and Altcoins Despite the challenges and uncertainties in the market, Bitfinex remains optimistic about the resilience of the macroeconomic environment. The analysts believe that consumers and businesses are better prepared and informed about the underlying economy compared to previous market cycles. As a result, they anticipate a period of consolidation for Bitcoin prices, with potential swings of $10,000 on either side. With Bitcoin ETF flows drying up and investors turning to altcoins for higher returns, the cryptocurrency market is poised for a period of transition and volatility in the coming months. Investors should closely monitor market developments and diversify their portfolios to navigate the evolving landscape of digital assets successfully.
