Bullish signals before halving?
BTC to USD stayed range-bound between $6,500~$7,200 over the past week. We saw a lot of choppy trading which is attributable to low open interest. Additionally, this is supported by data showing a sizeable decline in BTC held on exchanges.
The market is still LONG ahead of the halving with some other bullish signals from 1Q. Most notably we saw CME records spike in trading from new accounts and Grayscale’s Bitcoin Trust saw record-high inflow.
China’s CBDC, named DCEP, is moving forward as banks, such as ABC, launch a test app for specific users. A pilot program will also kick-off in Suzhou for government employees. It’s no coincidence that in parallel Huobi, a leading platform for China P2P trading, is cracking down on suspicious transactions. We can speculate the government aims to restrict the use of other cryptocurrencies, especially competing stablecoins like USDT.
Further negative sentiment on stablecoins comes from the FSB. Given the potential impact to capital flow and exchange rates, the FSB recommends strict controls and even a coordinated ban in the worst-case scenario. We’ll be monitoring the situation closely.
The above would obviously be detrimental to crypto markets and liquidity. It’s worth noting the total value transacted on Ethereum has caught up to that of Bitcoin. The majority of this comes from stablecoin flows. Furthermore, we’ve seen the Ethereum network activity growing quickly. This could be largely in part due to ETH 2.0’s expected release next month.
There have been a number of developments over the past week. The biggest items to watch will be China’s deployment of DCEP and Bitcoin’s price as we reach the 3rd halving event. Despite a trend in sideways trading in for Bitcoin, we’ve seen a bullish trend that we expect to grow over the next few weeks.