April: A Bullish Month for Bitcoin and US Stocks?
As the second quarter of the year starts, Bitcoin and US stocks enter one of their strongest seasonal periods of the year, according to Matrixport, a cryptocurrency services provider.
Markus Thielen, head of research and strategy at Matrixport, said that the recent bull rally in US stocks will likely have a positive spillover effect on cryptocurrencies, especially since April has been a strong month for Bitcoin and Ethereum as well. Bitcoin has gained in April in six out of the past ten years, averaging a return of over 17%. The S&P 500, Wall Street’s benchmark equity index, has gained eight out of ten times in April, averaging a return of 2.6% in the past ten years.
Inflation to decline, risk assets to rally
Thielen added that Matrixport’s big thesis for 2023 that inflation will decline is playing out, and all risk assets should rally as a result.
Bitcoin rose by 23% in March, taking its year-to-date gain to 67%, while the S&P 500 gained 7% this year. The Federal Reserve’s preferred inflation gauge cooled back down in February, raising hopes that policymakers will be able to reduce their aggressive monetary tightening.
OPEC+ decision to cut global oil output and its impact on risk assets
However, a key event over the weekend, which is now upending macro conditions, is the decision to cut global oil output by OPEC+. The organization has announced voluntary cuts in production totaling 1.65 million barrels per day, causing the US dollar to rise alongside energy costs.
This is a classic headwind for risk assets, including cryptocurrencies. The US Dollar Index (DXY) traded above 102.4 at the time of writing, up from April lows of 102.04. Crypto trader Crypto Ed uploaded an explanatory chart to Twitter, stating that it’s time for DXY to show its direction, which should affect BTC’s price action.
Government’s liquidity injection to boost risk-asset performance
While the OPEC+ move took its toll on assets from Bitcoin to gold, Alasdair Macleod, head of research for Goldmoney, argued that governments would have to inject liquidity to offset any energy price rises, thus once again boosting risk-asset performance.
WTI oil is up $3.60 this on ME and Asia cutting output. Market reaction is gold falls $13. Markets incorrectly believing it's "deflationary". But anyone with half a brain knows that central banks will just print faster and faster to pay for higher energy prices…
— Alasdair Macleod (@MacleodFinance) April 3, 2023
The Kobeissi Letter, a financial commentary resource, also stated that markets will soon react to the surprise OPEC production cut this weekend, adding that oil prices will likely rise above $80.00, which is an unwelcomed development by central banks attempting to fight inflation. Supply-side inflation is set to worsen on this news.
Central banks may hike interest rates despite ongoing banking crisis
Higher inflation would increase the odds of central banks continuing to hike interest rates despite the ongoing banking crisis in the US and abroad.
According to the latest estimates from CME Group’s FedWatch Tool, markets believe that the Federal Reserve will hike rates by another 0.25% in May, having previously been more in favor of a pause.
Bitcoin experiences volatility in response to Opec+ decision
The flagship cryptocurrency experienced a sudden drop below $28,000 as a result of the Opec+ decision to cut global oil output. However, BTC/USD staged a comeback, jumping $865 from the overnight lows of $27,600 on Bitstamp during the April 3 Asia trading session. Right now, the asset is trading around $28,200, according to CoinMarketCap data.
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Bearish outlook for BTC?
Despite the sudden recovery, crypto analysis and education resource IncomeSharks maintained a bearish outlook on BTC. It noted the “double top McDonald’s pattern,” referring to the structure of BTC/USD in 2023, suggesting a potential bearish trend.
#Bitcoin – I just can't unsee the double top Mcdonalds pattern. Now you got a diagonal trendline break, low volume, and weak OBV. Logic and unbiased emotions says to sell/short this, I don't see a reason to be bullish short term YET pic.twitter.com/5mgqszTT6U
— IncomeSharks (@IncomeSharks) April 3, 2023
The resource also highlighted a diagonal trendline break, low volume, and weak On-Balance-Volume (OBV), concluding that selling or shorting BTC in the short term may be the best option.
Crypto market sentiment and the Fear & Greed Index
The Crypto Fear & Greed Index, a classic sentiment indicator, suggests that “greed” continues to characterize the overall mood of the crypto market. As of April 3, the index measured 63/100, near its highest since Bitcoin’s all-time highs in November 2021.
However, analytics resource Game of Trades warned that the crypto market is getting too euphoric. While the level of greed, as depicted by the index, still has considerable room for growth until hitting “extreme” territory nearer to 90, this is typically a signal that a significant market correction is due.
Andrey Kunev
Reporter at CoinsPress
Andrey Kunev is a knowledgeable cryptocurrency content creator passionate about the crypto market. With extensive experience in market analysis and investment reporting, Andrey is a valuable asset to the CoinsPress team. As a frequent contributor, he offers insightful and comprehensive coverage of market trends, price fluctuations, and new advancements in cryptocurrency. Whether you're a seasoned investor or just getting started, Andrey's clear and concise writing offers a comprehensive look at the current state of the crypto market and its prospects. Stay up-to-date with CoinsPress's expert analysis and commentary on all things cryptocurrency.
