Crypto Market April Review: Bitcoin Faces Strong Correction, Heavily Impacted by Macroeconomic Factors

In April, the crypto market experienced significant volatility, with Bitcoin undergoing intense fluctuations after reaching an all-time high in March. At the beginning of the month, the price of Bitcoin sharply fell by over 5%, dipping below $66,000. Throughout the month, the price experienced multiple fluctuations, mainly driven by macroeconomic factors and changes in market sentiment. These movements aligned with shifts in expectations for U.S. interest rates, highlighting Bitcoin's sensitivity to global economic trends.

The derivatives market anticipated this decline, as the funding rate for Bitcoin perpetual futures indicates an impending adjustment. For many observers, the shift in market sentiment makes this adjustment seem inevitable, with a significant liquidation event occurring outside of US ETF trading hours.

Another factor that may influence the shift in BTC sentiment could be the changes in U.S. interest rate expectations, and the recent decline may be related to this. This reminds people that although many consider BTC to be a "store of value," it remains sensitive to macroeconomic changes.

Throughout the month, the BTC price fluctuated between $73,000 and $60,000. This stability may be attributed to several factors. A significant influence is the unexpected decline of the dollar index DXY. A weaker dollar makes the BTC price more attractive, thus supporting the BTC price.

Investors' attitudes towards the BTC halving event may lead to expectations of a price surge. This is another factor that could influence market sentiment. However, these expectations did not materialize, and the price of BTC was not affected.

Moreover, despite the slowdown, ETF inflows continue to support the market.

With the end of April, BTC is currently at the lower end of the price range, showing significant market weakness, which may lead to more interesting developments.

Innovation and Transformation of Crypto Investment Products

An important development in April is the ongoing exploration of asset tokenization, especially with the launch of an institutional-grade digital liquidity fund by a large asset management company. This fund is open only to accredited investors who can meet a substantial minimum investment requirement, represented by tokens on Ethereum. It primarily invests in safe, income-generating assets such as U.S. Treasury bonds and repurchase agreements, with dividends paid in tokens. This innovative model not only provides a new investment option but also demonstrates how blockchain can enhance the liquidity and accessibility of traditional financial assets.

The fund manages assets of over $375 million from just 10 holders, highlighting a significant advancement in integrating real-world assets with blockchain technology.

In addition, through collaboration with multiple institutions, the token has been further enhanced. This collaboration connects the token to the smart contract pool of USDC, enabling direct redemptions and continuous liquidity. As a result, investors can convert their token holdings into USDC at any time, supporting instant global transactions. This feature is particularly beneficial for crypto companies managing large finances, providing a seamless way for businesses to access funds quickly, as stablecoins become increasingly prominent in international transactions. This integration marks an important advancement in liquidity management within the financial sector.

Regulation and Geographic Expansion

April's regulatory actions in the crypto world are particularly significant, especially with the Hong Kong Monetary Authority's approval of Bitcoin and Ethereum spot ETFs. This approval is a game changer for the Asian market, particularly the Hong Kong market, although it is worth noting that access for mainland Chinese investors remains significantly restricted due to stringent regulations. This decision involves three major investment groups, highlighting the importance of integrating cryptocurrencies into a broader financial ecosystem.

In Europe, the situation regarding cryptocurrencies is also progressing. A large bank in Germany has announced that it is preparing to offer crypto trading and custody services. This action taken by a traditionally conservative financial institution highlights the growing perception of cryptocurrencies as legitimate, investable assets. The bank's approach is particularly noteworthy as they focus on integrating crypto services as part of their business model, rather than merely chasing speculative gains. This reflects a deeper and more practical application of blockchain technology in corporate finance.

Development of Ethereum and Regulatory Challenges

The trend of Ethereum is similar to that of Bitcoin, but it has received more intensive attention in terms of regulation. The SEC has yet to make a decision on the application for the Ethereum spot ETF, requesting the public to comment on the proposed amendments, which indicates the cautious attitude of regulators and the ongoing uncertainty in the regulatory environment.

It is worth mentioning that Consensys, the Ethereum lab, has sued the SEC, challenging the decision to classify "ETH as a security." This lawsuit may clarify Ethereum's position in relation to regulation and also affect other cryptocurrencies. If they win, it could impact market dynamics and boost investor confidence.

The lawsuit strongly suggests that the issuer is operating under the assumption that the approval will eventually be granted.

Bitcoin Halving

The Bitcoin halving event is happening this month, reducing the block rewards for miners by half. This change has significant long-term impacts on the network economy. While we have not seen a direct impact on prices, over time, the reduction in rewards may mean higher transaction fees, as miners increasingly rely on Gas to maintain profitability. This shift is important for the future of Bitcoin as a transaction network, especially since higher fees may reduce its appeal for small transactions. On the positive side, the development of Layer2 networks is underway, which helps balance the trade-off between security (more critical for larger transfers) and cost (a bigger factor in smaller transfers).

Macroeconomic Environment

The steady rise of gold and its connection to the crypto market

In April, gold remains the focus of attention. Despite a decrease in the holdings of the largest gold ETF in the United States, gold prices continue to rise.

This differentiation is noteworthy, especially in Asia, where net inflows into gold ETFs have been recorded despite less developed market infrastructure compared to North America and Europe.

Central banks have also been active buyers of gold, continuing a ten-year buying trend. Recent data from the World Gold Council shows that central banks purchase gold mainly for traditional market diversification and crisis hedging motives, rather than to move away from the dollar. The only increased motive last year was gold's performance during crises, highlighting global geopolitical and economic uncertainties.

This interest in gold seems to coincide with discussions in the crypto market about "seeking international payment options beyond the US dollar," reflecting a broader demand in the market for reliable alternatives outside of the conventional financial system.

Interest rate expectations and economic signals

April began with a heightened focus on the U.S. financial market, and expectations for interest rate cuts sparked lively discussions. Stronger-than-expected economic data dampened hopes for rate cuts in 2024. It seems that the U.S. economy may be more resilient than we had imagined.

Progress of the U.S. labor market and the Federal Open Market Committee (FOMC)

People are closely watching the U.S. employment data, with the ADP payroll expected to reveal a slight weakening in the labor market. This data is typically a precursor to the official employment statistics released a week later, which also indicate a softening, with the unemployment rate remaining at 3.8%. The JOLTS and Challenger layoff reports further provide information on hiring and layoff conditions.

Among these releases, the FOMC press conference is particularly critical, where Chairman Jerome Powell discussed the ongoing issues of inflation and the Federal Reserve's interest rate strategy.

The bond market is tense and the U.S. fiscal quarterly report.

This month, the quarterly report from the Treasury revealed some key financial strategies, detailing the upcoming bond issuance plans and adjustments to the overall budget, which directly affects market liquidity. This update is also reflected in the government bond market, as the reduction in liquidity and increase in volatility since the end of 2021 has drawn close attention from investors. Furthermore, the report highlighted the borrowing adjustments expected by the Treasury for the second quarter, which are now estimated to be $41 billion more than previously anticipated, totaling $243 billion. Although this increase seems significant, it is still relatively small compared to the vast total of U.S. national debt (currently over $34.5 trillion and continuing to rise).

Global Perspective

The global economy is also worth paying attention to. Japan's monetary market operations suggest that the government may intervene to support the yen. Essentially, the "yen bounce" (i.e., a sudden rise in the value of the yen) coincided with a decline in the DXY dollar index, leading to speculation that the Bank of Japan may intervene in the monetary market to influence the value of the yen.

At the same time, South Africa is taking measures to regulate encryption currencies, indicating that institutions there are increasingly interested in digital assets. In contrast, due to the risks of sanctions, Venezuela is facing difficulties using USDT (a type of digital currency) in its oil transactions.

Highlights of this Month

• A former CEO of a trading platform was sentenced to four months in prison for anti-money laundering violations, highlighting regulatory actions in the crypto market.
• A USD institutional-grade digital liquidity fund managed by an asset management company: The fund manages assets exceeding $375 million, indicating strong institutional interest in digital assets.
• Bitcoin and Ethereum Spot ETFs in Hong Kong: Hong Kong has launched six new Bitcoin and Ethereum ETFs, significantly expanding the regulated encryption investment options in the Asia region, reflecting the trend of regulatory approval for crypto investments.
• MicroStrategy expands its Bitcoin holdings: MicroStrategy has increased its total holdings to 214,400 BTC by purchasing more Bitcoin, continuing its Bitcoin investment strategy.
• Legal developments between Consensys and the SEC: Consensys is facing regulatory challenges from the SEC, which may affect the legal classification of Ethereum and the broader regulatory handling of encryption.
• Australia's potential spot Bitcoin ETF: Australia plans to launch its first spot Bitcoin ETF by the end of the year, which could expand the region's crypto market.
• Tether's expansion on the TON blockchain: Tether has launched USDT and XAUT stablecoins on the TON blockchain to enhance liquidity and access for decentralized applications.
• Hong Kong's cryptocurrency leap: Hong Kong plans to launch additional Bitcoin and Ethereum spot ETFs, further expanding regulated crypto investment options in the Asian market.
• The Rise of Cryptocurrency in South Korea: The South Korean Won surpassed the US Dollar in the first quarter of 2024, becoming the most traded currency in cryptocurrency transactions, demonstrating the country's increasing influence in the encryption field.
• Bored Apes NFT price plummets: The price of Bored Ape Yacht Club NFTs has plummeted, marking a former