Bitcoin: is the Post-halving Correction Over?

25 May 2024

Back in early May, some traders thought that a significant correction in Bitcoin was inevitable. The price of the world’s leading cryptocurrency dived below the $60,000 level and even attempted to settle below $57,000.

However, Bitcoin did not develop a strong downside trend. Slowly but surely, Bitcoin gained upside momentum and moved towards the $70,000 level. Has the correction ended and is it high time to prepare for the test of new highs?

A rising appetite for risk served as the key driver for Bitcoin and other major coins in recent weeks. The “everything rally” trend stays strong. U.S. stocks are testing historic highs at a time when gold, which is the traditional safe-haven asset, has also settled near all-time high levels.

Meanwhile, other world indices and precious metals have also enjoyed the rising demand for assets. This is a unique situation when demand for riskier assets and safe-haven assets is growing at the same time due to investors’ hunger for assets that could protect them from the gradual devaluation of fiat currencies. The general financial market sentiment is bullish as traders prepare for the beginning of the rate-cut cycle. According to the FedWatch Tool, the Fed is expected to start cutting rates in September. Traders expect two 25 bps rate cuts by the end of this year.

Other central banks are also projected to start cutting rates to provide support to their economies. ECB may begin its rate cut cycle in the summer as the Eurozone inflation has already stabilized. The start of the rate-cut cycle will bring additional liquidity to the global financial system, which will boost all riskier assets, including Bitcoin. In addition, there’s a chance that the Fed will start cutting rates before it takes inflation under control. Such a scenario would be bullish for Bitcoin and other assets as traders will search for ways to protect themselves against inflation.

There’s another potential reason for the increase in demand for Bitcoin and other leading coins. The U.S. regulatory rhetoric may change ahead of the presidential election. Crypto users are also voters, so fighting against crypto looks like a losing strategy for both political parties. For example, Trump has already announced that he would take crypto donations. Biden’s administration could be forced to be more friendly to crypto in the upcoming months to attract younger voters.

Bloomberg has recently reported that the SEC asked NYSE and CBOE to update the 19b-4 filings for the planned ETFs on ETH. The updated documents were posted for Fidelity, VanEck, and other major firms.

The potential admission of spot ETFs on ETH could serve as a significant bullish catalyst for crypto markets and push the price of Bitcoin to new highs. The new money would flow into the markets. The positive impact would be felt not only by ETH holders but also by other crypto investors.

From a big-picture perspective, crypto has a good window of opportunity thanks to the political climate in the U.S. and the beginning of the new rate-cut cycle. The second half of 2024 would likely be favorable for crypto markets and allow them to establish a higher level of penetration into the global financial system.