The recent Bitcoin halving event on April 19 has thrust the cryptocurrency market into uncharted territory, characterized by significant price fluctuations. Analysts, including Daniel González from Bitso, Latin America’s leading cryptocurrency exchange, assert that such volatility is a natural response to market dynamics.
This fourth halving event since Bitcoin‘s inception in 2009 has triggered a series of unforeseen market movements, notably a drop from the all-time high of $73,000 to $57,000 preceding the halving.
González highlighted key distinctions in this halving cycle compared to previous ones. Preceding the 2024 halving, Bitcoin witnessed a remarkable bullish surge, attributed largely to the introduction of Bitcoin exchange-traded funds (ETFs), facilitating institutional investment. The influx of capital propelled Bitcoin to unprecedented highs before the rewards reduction event.
Contrary to expectations, the post-halving market reaction diverged from historical patterns. While an immediate price surge was anticipated due to the supply reduction, there was instead a subdued response, dampening investor enthusiasm and prompting sales and price corrections.
González explained, “Volatility is normal because many expect an instant price increase post-halving. However, as this didn’t materialize, panic selling follows, adhering to the adage ‘buy the rumors, sell the news’.”
Macroeconomic factors have also influenced Bitcoin’s volatility. Statements by Federal Reserve Chairman Jerome Powell maintaining interest rates and expressing inflation concerns have impacted investor sentiment. Heightened uncertainty regarding traditional economic policies has driven increased interest in alternative assets like Bitcoin, perceived as resistant to conventional monetary policies.
Looking ahead, González cautioned against further price adjustments in Bitcoin, evident in its recent drop to $61,000, albeit rebounding to approximately $62,489. Several factors contributed to this decline, including apprehensions about US interest rates and heightened regulatory scrutiny targeting major crypto players.
Regulatory concerns loom large, with the US Securities and Exchange Commission (SEC) investigating Robinhood, Coinbase, and Ripple, potentially reshaping the legal landscape for cryptocurrencies. Ethereum, the second-largest cryptocurrency, faces scrutiny following the SEC‘s postponement of Ethereum ETF approvals pending its investigation.
Moreover, a recent report indicating artificial transactions in stablecoins has escalated regulatory apprehensions in this crucial crypto sector.
The market also grapples with the impending unlocking of altcoins worth nearly $2 billion, posing a potential negative impact on the altcoin market by increasing available supply.
These regulatory and supply-side developments unfold amidst uncertainties surrounding US interest rates, prompting traders to favor the dollar over higher-risk assets such as cryptocurrencies.
