Bitfinex analysts predict that the price of Bitcoin could consolidate for up to two months after the halving event. The latest edition of the Bitfinex Alpha market report released on April 29 noted that Bitcoin is expected to continue to be the price action benchmark for the crypto market in May and serve as the leading indicator for the entire cryptocurrency market cap. The analysts at Bitfinex also stated that Bitcoin is undervalued, with the Market Value to Realised Value (MVRM) ratio currently at 2.21. This ratio is seen as a potential entry point for investors, as historical patterns show substantial returns when MVRV dips below its 90-day average.
Despite Bitcoin being undervalued, Bitcoin dominance is experiencing a decline, with Ethereum and other altcoins outperforming BTC. The report suggests that post-halving periods often see a shift in investor focus towards altcoins, as investors search for potentially higher returns. This shift in investment patterns is attributed to the recent federal economic report highlighting slower-than-anticipated growth in the US economy, with the real GDP annual rate falling to 1.6% in the first quarter of 2024, down from 3.4% in the last quarter of 2023.
The slowdown in the US economy’s growth is mainly due to macroeconomic factors, with higher interest rates discouraging investors from allocating funds to volatile assets like Bitcoin. The Fed’s key inflation gauge, the personal consumption expenditures (PCE) index, saw no change in March, holding steady at a 0.3 percent increase month-over-month. This combination of slowing growth and accelerating inflation has reignited fears of stagflation, a scenario where economic growth stalls as prices continue to rise. Despite this, Bitfinex believes that the macroeconomic environment is more resilient than in previous years, with general consumers and businesses better prepared and informed about the state of the underlying economy compared to previous crypto market cycles.
The analysts at Bitfinex predict a 1-2 month consolidation in Bitcoin prices, where the cryptocurrency could trade in a range with swings of $10,000 on either side. This consolidation is expected due to the current macroeconomic environment and the behavior of investors shifting towards altcoins. Additionally, the report highlights a shift towards altcoins, as recent US Bitcoin spot ETF inflows have dried up. Following the SEC’s approval of Bitcoin ETFs in January, these investment vehicles gained widespread adoption, with roughly $12 billion flowing into them. However, most of these inflows occurred last quarter, resulting in a surge in the Bitcoin price to new all-time highs before losing momentum in April.
Markus Thielen, the Founder of 10x Research, predicts that ETF flows tend to run out unless prices continue to increase, which has not been the case since early March. This is exemplified by the underwhelming inflows into the recently launched Hong Kong Bitcoin Spot ETFs, indicating that investors are not confident in the current state of the market. Overall, the report suggests that investors are turning to altcoins as a hedge against the market uncertainty and stagnation in Bitcoin ETF flows, which could lead to a consolidation in Bitcoin prices for the next 1-2 months.
