The institutional arm of US-based digital asset exchange platform Coinbase says crypto investors should be prepared for more consolidation this quarter.
According to new research by Coinbase Institutional, crypto traders are wary of the possibility that the US economy will experience a recession.
However, Coinbase says there are bullish catalysts ahead as long as the economy remains stable.
“The concern is that cuts may not be bullish for markets if there is fear of a bigger slowdown. That is, retail investors will likely be reluctant to take on new stock or crypto positions if the US economy enters a recession.
On the other hand, if the economy is still doing relatively well and the Fed cuts spending, that could free up more liquidity and lead to more retail participation.
Moreover, there are US elections coming up in November, with fiscal expansion looking a strong possibility no matter who wins. We believe that this is a strong incentive to buy Bitcoin as an alternative to the traditional financial system.”
Coinbase further says it is uncertain how traders will react to the approval of Ethereum (ETH) exchange-traded funds (ETFs) in the near term. But the crypto exchange notes that the launch of Ethereum ETFs is bullish for the leading altcoin in the long term.
Coinbase also says it expects crypto to witness wild price swings in the coming months before a clear trend emerges.
“For now, we expect price action to remain choppy in Q3 2024 as crypto markets still lack strong narratives. For example, the market cannot decide whether potential ETH ETF flows in the spot market (the experts expect a launch fairly soon) will be bullish or bearish, although we don’t think this is necessarily a bad thing from a positioning perspective.
This could leave room for surprising outperformance and provide ETH with more support even if flows take some time to materialize.
Overall, however, we believe the next two months are likely to bring more volatility before things improve more seriously in late September.”
Ethereum is trading at $3,205 at the time of writing, up more than 2% in the past day.
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