Are institutions positioning themselves for the Bitcoin halving?

Bitcoin is leading the cryptocurrency markets upwards as the global transition to digital currency looks more inevitable than ever.

Two of the biggest players—Facebook’s Libra and China’s digital yuan—have announced significant progress. The digital yuan is now in public beta in four pilot regions, and Libra is moving forward with a formal license application. This aims to win regulatory approval with a plan involving individual stablecoins pegged to various different fiat currencies.

Leading cryptocurrency Bitcoin is up 1% on the week, outpaced by Ether which has risen 3%.

Both large-cap coins are likely to be benefiting from the presence of institutional investors: Open interest in Bitcoin futures on the Chicago Mercantile Exchange (CME) has increased significantly since March, and Grayscale’s record-breaking quarterly influx also suggests institutions might be trying to get a slice of the pre-halving Bitcoin price action. 

This Week’s Highlights

  • Bitcoin Halving Search Interest Soars
  • Stablecoins Thrive Amid Global Uncertainty 

Bitcoin Halving Search Interest Soars

COVID-19 has replaced the halving as the key talking point in the cryptocurrency markets, as pointed out in a study from eToro and The Tie last week.

But as search data from Google Trends shows, the halving remains a hot topic. Searches for “Bitcoin halving” hit an all-time high in the second week of April, suggesting growing curiosity about the biggest event in the Bitcoin calendar.

Although the network adjustment is typically thought to be bullish, not all analysts are in agreement. In its recent “State of the Network” report, crypto data firm Coin Metrics warned of a possible bearish outcome as miners are forced to sell. 

Stablecoins Thrive Amid Global Uncertainty 

Pandemic panic has put the dollar in hot demand, and a similar story is playing out in the cryptocurrency world.

As Federal Reserve Chairman Jerome Powell has been distributing new dollars to meet demand, Tether and other stablecoin creators have been busy issuing their own crypto-equivalents. 

Data from CoinMarketCap shows a 37% jump in the market cap of Tether’s $USDT over the past 3 weeks, and a 6% increase in the market cap of competing stablecoin $USDC.

Whether this is a reflection of the global demand for dollars, or just from people selling Bitcoin to hedge their positions is not clear, but the data points to an abundance of stablecoins waiting on the sidelines to enter the market.

The Week Ahead

The spread of COVID-19, together with the Bitcoin halving in three weeks’ time, are likely to be the biggest drivers of the cryptocurrency market over the next week.

On Friday, traders will be anxiously awaiting the expiry of the CME Bitcoin futures contracts at 4:00 pm London time. Several analysts have noted unusual price movements around the settlement of these contracts, and a study from Arcane Research in September 2019 found the Bitcoin price falls an average of 2% before each monthly expiry date.

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