The crypto market witnessed a number of historic events in April, including the long awaited Bitcoin’s fourth halving, the debut of Runes Protocol and the first ever Epic Satoshi auction. Despite substantial attention garneded, geopolitical tensions and U.S. macroeconomic uncertainties have held Bitcoin’s directional movement in a state of anticipation.

Meanwhile, Ethereum and Altcoins experienced varied dynamics, with Ethereum experiencing a minimal level of gas coupled with record high ETH staking, and altcoins showing stagnation despite robust stablecoin inflows. We think the crypto landscape in April underscored a cautious but well-liquified market poised for potential shifts dependent on broader economic and trading signals.

The Long Awaited Bitcoin Halving

The long awaited Bitcoin’s fourth halving had taken place on 20 April 2024, reducing the block rewards earned by miners from 6.25 BTC to 3.125 commencing at block 840,000. The Bitcoin price has been oscillating in the range of $59,000 to $73,700 since the end of February and it has re-tested the $60,000 support level multiple times. The consolidation was also accompanied by the ETF net outflows of over $340m in April.

In our view, the market appears to be trading time for space. While near-term corrections are possible due to ETF outflows and the postponement of Fed rate cuts, we believe that the inflow of institutional funds and the improving fundamentals in the crypto sector are inevitable in the medium to long term.

Stablized Volatility Could Signal Break Out Soon

After experiencing volatile market conditions in March, the volatility of Bitcoin has plummeted rapidly, reaching the levels close to those seen in the beginning of the year. From our observation, the market tends to break out of the range approximately after 15 to 40 days when volatility stabilizes after a period of oscillation. Currently, volatility has been at a low level for about a month. We believe that Bitcoin will show a clearer direction in early to mid-May.

The First Ever Epic Satoshi Auction

The mining of the 840,000th block by ViaBTC marked not only the halving but also the inclusion of one out of the four “Epic Satoshis” in the market. CoinEx organized the first ever auction for this epic sat, which saw significant participation and culminated in a winning bid by a Bitcoin NFT community called the Blob. This milestone is expected to pave the way for novel applications within the Bitcoin network, reflecting the growing utility and valuation of rare sats.

The Birth of Runes Protocol

The fourth halving event also siginified the birth of the Runes Protocol. Post-launch, Runes tokens swiftly captured market attention, reaching a market cap of over $900 million with over 450,000 holders as of April 30, 2024. The excitement surrounding the creation and minting of Runes tokens was reflected in the spike in transaction fees. At its highest point, the median Bitcoin transaction fee escalated to more than 1,900 satoshis per virtual byte sat/vB. However, by the end of the month, fees had moderated back to the more typical range of 20-30 sat/vB.

Geopolitical and U.S. Macroeconomic Influences

Unlike past halving events, which occurred in a low interest rate environment with global monetary easing policies in place, we think Bitcoin will likely face a much more challenging macro backdrop in the coming cycle. While the market still expects rate cuts by the Fed this year, multiple mixed factors are influencing market sentiment. These include the U-turn in CPI measures since January, the potential resumption of a trade war between the U.S. and China, the upcoming U.S. presidential election, and the prevailing high interest rate environment. It is worth noting that the US10Y treasury yield is currently standing at 4.6%, the highest level ever seen in Bitcoin history. The ongoing geopolitical tensions have further added complexity into the crypto market, ranging from the Ukraine-Russia war and Israel-Hamas conflict to the uncertainties over the South China sea.

Ample Liquidity Poised for ActionThe Silence of Ethereum

Despite the spotlight on Bitcoin in April and the performance lag of ETH, on-chain data revealed that multiple whales have been accumulating significant amounts of ETH in the month. April also saw a dip of gas fee, which fell to below 10 gwei on the day of Bitcoin halving.

This period of low fees also corresponds with the record high level of staked ETH in which over 26% of circulating ETH are staked, contributing to the diminished on-chain activity. Further, the total value locked (TVL) of the leading liquid staking and restaking protocols also reached impressive heights, with $39bn and $14bn respectively. In our view, the low gas environment could present a strategic opportunity for investors to engage in Ethereum-based activities and positions.

Restless Stablecoin

Over the past six months, stablecoins have exhibited remarkable growth, with the combined market capitalization of USDC and USDT reaching an unprecedented $140 billion. This figure not only surpasses the peak stablecoin market capitalization witnessed during the 2022 bull market but also underscores the consistent net inflow of funds into the crypto market.

As Bitcoin faced a retracement and global economic uncertainties mounted, market sentiment shifted dramatically towards risk aversion, triggering widespread liquidation of altcoins. This cautious behavior was observed both among new market entrants and existing players, who opted for a cautious, wait-and-see strategy in the face of macroeconomic instability.

Despite this apparent downturn in market performance, the underlying liquidity remains robust, suggesting that the market participants are not exiting but rather biding their time, waiting for an opportune moment to re-engage. We anticipate that once Bitcoin establishes a clear trend and the broader market environment finds stability, these funds are likely to migrate towards the altcoin sector, potentially catalyzing significant inflows into high-quality assets. Should Bitcoin's price decline, attractive buying opportunities may present themselves, whereas a resumed upward trend could ignite a rally, encouraging investors to chase the momentum.Economic Data & Events to Watch in May 2024

Disclaimer

The content provided in this report is for illustrative purposes only and is intended to offer insights into the cryptocurrency market. It is not, and should not be interpreted as, investment advice or recommendations. The information contained herein is based on sources believed to be reliable; however, we do not guarantee its accuracy, completeness, or suitability for any purpose, and it should not be relied upon as such. Any opinions expressed reflect a judgment at the date of publication and are subject to change without notice. Readers are advised to conduct their own research and due diligence and, where appropriate, seek professional advice before making any investment decisions. The authors and publishers of this report accept no liability for any loss or damage arising from the use of the information provided.

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Macro Monthly Report (April)