SUPERNEWS

Crypto

Bitcoin Dips 16% in April, Reflects Global Market Trends: Coinbase

Bitcoin's 16% April drop linked to global market trends, not crypto-specific issues, amid broader equities and gold weakness.

By Athena Xu

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5/3, 10:51 EDT
Bitcoin / U.S. dollar
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Key Takeaway

  • Bitcoin's 16% drop in April, its largest since June 2022, mirrors declines in equities and gold, suggesting its weakness is tied to broader market trends.
  • Coinbase remains optimistic about Bitcoin's future due to reduced drawdowns and its growing legitimacy as a macro asset, highlighted by global ETF launches.
  • Despite the first outflow from Blackrock’s iShares Bitcoin Trust (IBIT), Coinbase believes BTC price discovery is still driven by global demand rather than ETF flows.

Bitcoin's Broad Market Context

Bitcoin's recent decline of 16% in April, marking its most significant monthly drop since June 2022, is not an isolated event within the crypto markets. According to a research report by Coinbase, this downturn coincides with broader market trends, including the weakening of equities and gold against a strengthening dollar. Analysts David Han and David Duong from Coinbase highlight that despite this pullback, Bitcoin's maximum drawdown from its peak is at 23%, which is below its historical range. They attribute this resilience to the legitimization of Bitcoin as a macro asset, further supported by the introduction of spot exchange-traded funds (ETFs) in various global markets.

ETF Flows and Price Discovery

The report sheds light on the dynamics of ETF flows and their impact on Bitcoin's price discovery. Despite Blackrock’s iShares Bitcoin Trust (IBIT) experiencing its first-ever outflow after a 70-day inflow streak, Coinbase analysts argue that ETF flows only partially drive Bitcoin's price discovery. They point out the significant discrepancy between the average weekday spot volume on centralized exchanges (CEXs) and the daily volume of U.S. spot ETFs, suggesting that global demand trends continue to play a pivotal role in determining Bitcoin's price. This perspective is reinforced by the comparison with gold, where U.S. ETF outflows have not hindered the precious metal's 12% rise year-to-date.

Market Sentiment and Future Outlook

The recent downturn in Bitcoin's value has sparked discussions among investors regarding its implications for broader market risks. Charlie Morris, Chief Investment Officer at ByteTree Asset Management, views Bitcoin as a "canary" for potential shifts in global market risk appetites. The cryptocurrency's sensitivity to changes in liquidity dynamics, influenced by the Federal Reserve's stance on interest rates, underscores its role as an indicator for financial market trends. Despite the challenges posed by Bitcoin volatility and the mixed success of new ETF launches, analysts remain attentive to inflation, employment, and economic data that could influence market sentiment and the Federal Reserve's policy decisions.

Street Views

  • David Han and David Duong, Coinbase (Cautiously Optimistic on Bitcoin):

    "What leaves us optimistic in this pullback is that BTC’s maximum drawdown from peak is at 23%, below its historical range... We believe that this trend of overall reduced drawdowns will persist, in part because of the legitimization of BTC as a macro asset."