Recent trends in the cryptocurrency market have bitcoin–btc-bulls-pause-leveraged-bets-as-demand-cools-post-halving” target=”_blank” rel=”nofollow”>indicated a notable change in the behavior of traders, particularly among those who invest in bitcoin.
Using data from CryptoQuant, Bloomberg has btc/chart/derivatives/funding-rates?exchange=all_exchange&window=DAY&sma=0&ema=0&priceScale=log&metricScale=linear&chartStyle=column” target=”_blank” rel=”nofollow”>revealed that the bitcoin funding rate (the cost for traders to open long positions in bitcoin perpetual futures) has turned negative for the first time since October 2023.
This shift suggests a “cooled interest” in taking advantage of bullish bets on bitcoin, coinciding with the fading impact of key market drivers.
bitcoin market dynamics after the halving
The decline in bitcoin's funding rate correlates with a reduction in net inflows to US spot bitcoin exchange-traded funds (ETFs), which previously drove the cryptocurrency to record highs.
Despite the anticipation surrounding bitcoin Halving (an event that reduces the reward for mining new blocks and, in theory, decreases the supply of new coins), the impact on prices has been surprisingly muted.
According to Bloomberg, this subdued response has compounded the effects of broader economic factors, such as geopolitical tensions and changes in monetary policy expectations, leading to greater risk aversion among investors.
Following the latest bitcoin halving, the market has not seen the bullish surge that many expected. Instead, bitcoin has only seen a correction of over 10%, from its all-time high (ATH) in March, with prices stabilizing in the $63,000 region, at the time of writing.
As CryptoQuant head of research Julio Moreno noted, the recent drop in bitcoin funding rates below zero underscores a “lower enthusiasm” among traders for taking long positions.
According to Bloomberg, this trend is supported by a significant drop in daily inflows into US spot bitcoin ETFs and a reduction in open interest in bitcoin futures on the Chicago Mercantile Exchange (CME), which indicates a broader cooling of enthusiasm for cryptocurrency investments.
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(1/4) bitcoin ETF Flow – April 25, 2024 – UPDATE pic.twitter.com/ojRayOFlnu
— BitMEX Research (@BitMEXResearch) twitter.com/BitMEXResearch/status/1783449880435818996?ref_src=twsrc%5Etfw” target=”_blank” rel=”nofollow”>April 25, 2024
In a Bloomberg report, Vetle Lunde, an analyst at K33 Research, noted that “the current streak of neutral to below-neutral funding rates is unusual,” suggesting the market could be entering a phase of price consolidation. .
Notably, this period of reduced leverage activity could potentially lead to further price stabilization, but also raises questions about the near-term prospects for bitcoin's recovery.
Mining difficulty adjustments and market implications
Interestingly, along with these market adjustments, bitcoin mining difficulty increased for the first time immediately after the fourth halving.
The difficulty adjustment, which occurs every block of 2016, increased by 2%, reaching a new high of 88.1 trillion, according to data from Bitbo.
This adjustment contradicts past trends where difficulty generally decreased after the halving due to reduced profitability driving less efficient miners out of the market.
This anomaly in mining difficulty suggests that despite lower rewards post-Halving, miners remain active, possibly driven by more efficient mining technologies or strategic changes within mining operations.
This resiliency in mining activity could help maintain network security and processing power. Still, it reflects the complexities of predicting bitcoin market dynamics based solely on historical halving results.
Featured image from Unsplash, chart from TradingView
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