The 2 Factors That Suggest a Quarter-End Bitcoin Price Rally

The crypto market has seen a recent stabilization, particularly with Bitcoin momentarily surpassing the 200-day simple moving average, reaching $84,000. This surge can largely be attributed to the recent U.S. Consumer Price Index (CPI) release, which was less severe than anticipated, bolstering expectations around forthcoming interest rate reductions by the Federal Reserve.

In the last 24 hours, the revival was primarily influenced by the memecoin sector, alongside tokens from layer-1 and layer-2 blockchains as well as artificial intelligence tokens, according to data from Velo. However, lingering issues such as President Trump’s tariffs, fears surrounding a possible recession in the U.S., and volatility within the bond markets pose ongoing risks to the resilience of this recovery.

Two key factors suggest the potential for sustained improvement. First, the nearing quarter-end rebalancing indicates that funds, which had become overweight in bonds as the Nasdaq and S&P 500 fell 6% and 4.8% respectively this quarter, are now likely to sell bonds in favor of equities. Historically, this has aided Bitcoin and the broader crypto market, given the strong correlations with tech stocks.

Secondly, the Japanese yen has faced considerable pressure. Earlier analysis suggested that bullish positioning in the yen could stabilize the crypto market. The yen, typically a safe haven, may continue to weaken, particularly as U.S. bond yields rise due to the anticipated equity rebalancing. This hints that the risk-off sentiment driven by JPY strength and the paring down of yen carry trades may soon pass.

Moreover, a favorable environment of positive net global liquidity, largely influenced by macroeconomic conditions in China and the U.S., could incentivize risk-taking among investors. Commenting on this development, Two Prime, an SEC-registered investment advisor, noted that recent trends suggest a downward trajectory in U.S. inflation, which should alleviate pressures on non-U.S. central bank bonds, including those tied to the yen.

Despite these dynamics, volatility remains a concern. The options market on Deribit reveals significant negative dealer gamma between $81,000 and $87,000. This signifies that dealers will likely engage in trading that amplifies market fluctuations to manage their neutral exposures.

Looking ahead, market participants are on high alert for news updates. The U.S. data release concerning the February producer price index (PPI) and weekly jobless claims is scheduled for today. Analysts anticipate that an unexpectedly high PPI report may spur a volatility backwash across risk assets.

Market Watch and Updates:

• Macro Events: The U.S. Bureau of Labor Statistics (BLS) will disclose February PPI later today.

  • Core PPI (MoM): Expected at 0.3%
  • PPI (YoY): Previously reported at 3.5%

• Earnings Estimates:

  • March 14: Bit Digital to report $-0.05 pre-market.
  • March 24: Galaxy Digital Holdings, projected earnings C$0.38.

• Token Events:

  • Unlocks scheduled for various tokens, including Starknet and Arbitrum, over the next week, along with notable token listings on platforms like OKX and Bybit.

• Crypto Market Performance:

  • Bitcoin (BTC): $83,335.37, unchanged from prior close (+0.98%)
  • Ethereum (ETH): $1,896.33, down 0.29%
  • CoinDesk 20 index: Up 0.55%
• ETFs and Flow Data:
  • BTC ETFs saw a net inflow of $13.3 million, with total holdings nearing 1,117 million BTC.
  • ETH ETFs reported outflows of $10.3 million.

In summary, while the crypto market appears to have stabilized recently, multiple external factors continue to exert pressure. Traders should remain cautious and vigilant, as upcoming economic data releases may further influence market dynamics. Current trends suggest a cautious optimism, albeit underpinned by significant uncertainty.