Key Points
- Bitcoin’s price might stay under correction until April due to a stronger U.S. dollar and shifting market dynamics.
- Wall Street’s growing role and arbitrage strategies by hedge funds are impacting Bitcoin’s volatility.
Bitcoin’s price is anticipated to remain under correction until April, as per a recent analysis by Matrixport. This prediction is attributed to global liquidity and macro factors, including a stronger U.S. dollar exerting pressure on the cryptocurrency.
Bitcoin and Traditional Finance
Spot Bitcoin exchange-traded funds have witnessed significant inflows, totaling $39 billion within 14 months. However, as Bitcoin has been increasingly embraced by Wall Street, the cryptocurrency’s price has become more linked to traditional financial factors, according to the analysts.
The analysts from Matrixport point out that a stronger U.S. dollar results in a decrease in this liquidity measure, which implies a downward pressure on Bitcoin prices. They provide the example of global liquidity peaking in late December 2024, driven by a surging U.S. dollar, as a clear explanation for Bitcoin’s ongoing correction.
Wall Street’s Influence and Bitcoin’s Volatility
As Bitcoin becomes more entwined with traditional finance, the analysts anticipate the price downturn to persist until at least March or April. Following the correction, Bitcoin may attempt to recover to previous highs, they suggest.
Matrixport also emphasizes the increasing influence of Wall Street investors. While wealth and asset managers view Bitcoin as a long-term investment, hedge funds are leveraging arbitrage strategies to gain from Bitcoin’s volatility. According to Matrixport, these hedge funds “hold $10 billion in Bitcoin ETFs, and with total inflows reaching $39 billion, this implies that at least 25% of Bitcoin ETF capital is linked to arbitrage trades.”
