A new report from Coinbase Research notes that macroeconomic stress is taking a heavy toll on the cryptocurrency market. Analysts expect the market to remain fragile in the coming weeks amid a lack of catalysts that could push prices higher.
The influence of macro factors
The report highlights the cryptocurrency market’s increased dependence on broader economic events. Recently, the Bank of Japan's decision to raise interest rates is considered to be the trigger for unwinding the yen carry trade, which has had an impact on global markets. In addition, the renewed geopolitical tensions in the Middle East have also triggered concerns about oil supply, further exacerbating market instability. These macro pressures truly affect investor sentiment and market stability.
Coinbase analysts noted that leverage in the on-chain spot market has dropped significantly, which may mean that the recent sharp decline has made investors more cautious. They believe that with no clear catalysts currently in place, cryptocurrency price action will continue to be dominated by macroeconomic factors in the short term.
Third quarter strategy
Looking ahead, Coinbase is taking a cautious stance in Q3 2024. The company's outlook is largely based on upcoming U.S. inflation data, which could influence market sentiment. If the inflation data is better than expected, it may boost confidence; but if the data is not ideal, investor confidence in cryptocurrencies may be further hit.
Still, analysts aren't entirely pessimistic. They said that if the U.S. economy recovers, token valuations may recover. Some analysts have even hypothesized that Bitcoin could reach new all-time highs later this year if macroeconomic conditions stabilize. These differing views reflect the current uncertainty in the cryptocurrency market.
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