Coinbase Research Director: Institutional ETF Observation Period Ending, Expecting Significant Inflow of Bitcoin ETFs in Q2

Coinbase's research director David Duong wrote an analysis discussing the recent market stagnation, but also expressed optimism for the cryptocurrency market's performance post-mid-April.

Bitcoin Consolidates at $70,000, Why?

Why is Bitcoin fluctuating around the $70,000 level? David Duong believes there are two main reasons.

U.S. Tax Season, Corporate End-of-Quarter Rebalancing

This year, the tax season in the U.S. runs from January 23 to April 15, with the deadline for filing extensions being October 16. For most taxpayers, the deadline is on April 15.

In addition, David Duong points out that the impact of the U.S. holidays and corporate end-of-quarter investment portfolio adjustments are potential catalysts for recent market profit-taking.

MicroStrategy Shorted

He believes that speculators shorting MicroStrategy (MSTR) and going long on Bitcoin is one of the reasons for recent market volatility.

The good news is that these adverse factors are expected to gradually dissipate.

MicroStrategy was shorted by Kerrisdale Capital, resulting in an 11% drop in stock price.

Stronger Crypto Market in the Second Quarter

While optimistic about the crypto market's performance in the second quarter, David Duong believes that these positives will start to take effect after mid-month, for the following reasons.

Bitcoin Halving, Institutional Due Diligence Period Ending for ETFs

Bitcoin is set to halve in mid-April, often signaling the start of a bull market.

He also points out that many brokers conduct due diligence for new financial products such as Bitcoin spot ETFs, which typically have a 90-day review period.

Reviews include:

1. Whether such products meet minimum investment thresholds and liquidity thresholds.

2. Issues such as daily trading, custody, and regulatory matters that may pose challenges to their existing infrastructure.

The review period could end as early as April 10, which may bring a new inflow of funds into Bitcoin spot ETFs.

Institutions Continuously Arbitraging through CME

David Duong also mentioned that on March 19, the Chicago Mercantile Exchange (CME) saw a record high of 19,917 open contracts for Bitcoin futures.

He notes that the price difference between March Bitcoin spot and CME Bitcoin futures yields an annual return rate of approximately 16%, slightly up from 14% in February, indicating that many institutions unable to hold Bitcoin directly are still indirectly investing in Bitcoin through this means.

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