The price of Bitcoin saw a significant decline from its all-time high, failing to sustain the momentum and breaking below key support levels around $68,300 and $63,400 before resuming back above $64,000 as of April 19.
Experts’ forecasts pointed to a potential drop below $60,000, with a period of consolidation expected before a possible upside rally after Bitcoin’s halving.
Could the Bitcoin Halving Cause Cryptocurrency Prices to Fall?
1. Expiration of Bitcoin Options
Ahead of Bitcoin’s expected halving event on April 20, Friday saw the expiration of a significant portion of Bitcoin and Ethereum options totaling over $2 billion. Interestingly, a significant portion of Bitcoin options are set to expire on April 26, totaling over $5.5 billion. This suggests high chances of Bitcoin trading below $60,000 after the halving, which will increase market volatility.
2. Historical Bitcoin Pattern
Historically, the Bitcoin market has seen a pre-halving selloff similar to previous halving events, usually followed by a period of consolidation before a significant price rally. However, some analysts expect a downward trend in the second and third quarters, driven in part by increased mining costs and subsequent selling pressure from miners. However, long-term price targets for Bitcoin and Ethereum remain optimistic.
3. Delay in Fed rate cuts and macro uncertainty
The Federal Reserve’s position on respect of interest rate cuts, driven by inflation data and the resilience of the economy, is impacting both equity and cryptocurrency markets.
Speculation surrounding interest rate cuts weighed on market sentiment, with recent inflation data causing BTC prices to fluctuate. Analysts predict a potential drop in the price of the flagship cryptocurrency, influenced by consumer price index data and macroeconomic uncertainty.
4. Tension between Iran and Israel
Escalating tension between Iran and Israel led to significant liquidations in the crypto market, which caused a drop in the global capitalization of the crypto market. Geopolitical events, combined with a rise in the US dollar index and government bond yields, contributed to the fall in the price of Bitcoin.
5. Withdrawal from ETF BTC
Spot Bitcoin ETFs have seen consistent outflows, which may signal waning institutional interest and tax-related activities in the US. The outflow from Grayscale GBTC and other Bitcoin ETFs indicates weakening investor confidence in the short term.
6. Drainage of funds from banks due to end of BTFP
The termination of the Bank Term Funding Program (BTFP) has raised liquidity concerns in the banking sector, which could lead to a repeat of the massive withdrawals of bank deposits of the past. The lack of permanent liquidity due to the termination of the BTFP could have short-term negative consequences for the markets.
