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Coinbase: Bitcoin halving to face challenges from seasonal weakness in crypto markets

Coinbase warns of seasonal weakness during 2024 Bitcoin halving

Key takeaways:

  1. Coinbase warns that the upcoming Bitcoin halving may face challenges due to the historically weak performance of crypto markets during this time of year.
  2. Despite seasonal challenges, Coinbase sees signs indicating the potential for an influx of new investors in the near future, driven by Bitcoin's increased acceptance as a form of "digital gold."
  3. The U.S. Court of Appeals recently ruled in favor of Coinbase, confirming that the secondary sales of cryptocurrencies on its platform do not violate the Securities Exchange Act.

 

As the highly anticipated Bitcoin halving event approaches, many crypto traders are hoping for a significant price spike. However, cryptocurrency exchange Coinbase has cautioned that the halving, expected to occur on April 20 or 21, may face challenges due to the historically weak performance of crypto markets during this time of year.

How Bitcoin halving works?

Bitcoin halving is a built-in feature of the Bitcoin protocol that occurs approximately every four years or after every 210,000 blocks are mined. Bitcoin halving means that the reward given to Bitcoin miners for verifying transactions is cut in half, effectively reducing the rate at which new Bitcoins enter circulation. 

Why Bitcoin halving matters?

This process is designed to control inflation and maintain the scarcity of Bitcoin over time. As the reward diminishes, the value of Bitcoin is expected to increase, assuming demand remains constant or grows. The next Bitcoin halving is expected to take place in April 2024, reducing the block reward from 6.25 to 3.125 BTC.

In its April 5 market commentary report, Coinbase noted that the crypto market needs to find a new narrative to sustain the upward momentum in prices. The exchange stated: 

"The BTC halving, currently due April 20 or 21, could be a catalyst for higher prices, but it will have to contend with what is typically a weak time of year for crypto markets and other risk assets."

Data from digital assets research firm Brave New Coin reveals that since 2011, Bitcoin has seen an average monthly return of about 2.7% from June to September, while in the other eight months, it averaged a return of around 19.3%. Moreover, Coinbase observed that overall crypto volumes have been slowing down, with the total crypto volume declining by 33.25% over the last 24 hours, according to CoinMarketCap data.

Potential for new investors and dip-buying opportunities

Despite the seasonal challenges, Coinbase sees signs indicating the likelihood of an influx of new investors in the near future. The exchange stated: 

"In our view, bitcoin's increased acceptance as a form of 'digital gold' could enable demand from a new subset of investors in this market regime."

As more investors enter the market, Coinbase believes that price dips will be more aggressively bought compared to previous cycles, even as volatility persists during price discovery. The exchange noted: 

"As a result, we think dips are likely to be more aggressively bought compared to previous cycles, even as volatility persists during price discovery."

Historically, Bitcoin halving events have been associated with price surges. Following the previous halving in May 2020, Bitcoin's price rallied from $8,787 during the halving to nearly $69,000 in November 2021. Currently, Bitcoin's dominance in the overall crypto market stands at 50.6%, according to CoinStats data.

In other news, the United States Court of Appeals for the Second Circuit recently ruled in favor of Coinbase, confirming that the secondary sales of cryptocurrencies on its platform do not violate the Securities Exchange Act, dismissing claims that the exchange was offering and selling unregistered securities.