Bitcoin is heading to its worst month since 2022 and could be in for more chop in May

Published Tue, Apr 30 202410:02 AM EDTUpdated Tue, Apr 30 202412:14 PM EDT

Bitcoin's seven-month rally is on pause heading into May, now that two key catalysts watched closely by investors this year – the bitcoin ETFs and the halving – are done. The flagship cryptocurrency has fallen nearly 14% in April, according to Coin Metrics, and is on pace to post its first negative month in eight, and its worst month since November 2022, when FTX collapsed. It's still up 43% for 2024. BTC.CM= 1M mountain Bitcoin over the past month "The well of catalysts to spur bitcoin looks to have run dry with ETF demand petering out and the halving behind us, and it might well be we enter a multi-month sideways snooze-fest, repeating March to October 2023 when bitcoin drifted in a $5,000 trading range between $25,000 - $30,000," said Antoni Trenchev, co-founder of crypto exchange Nexo. May has proved to be a stumbling block for bitcoin in recent years, but investors should avoid getting sucked into a negative mindset in the coming weeks, Trenchev added. If the cryptocurrency finishes next month in the red, it would be its fourth year in a row doing so. However, it's proved to be a winning month in the previous halving years of 2012, 2016 and 2020. Plus, he said, history suggests it's only a matter of time before bitcoin's price rockets after the halving. Bitcoin investors are hoping to see big returns in the coming months, not just because of that historical trend but because of the success of the newly launched U.S. bitcoin ETFs, which have dominated the crypto investing discourse so far this year and will continue to be the main story for months to come, analysts say. "This halving reduced the daily issuance of bitcoin from 900 to 450 roughly – a fairly small amount of reduction compared to how much ETF demand flows into the asset on any given day, or in some cases does not flow in," said Lyn Alden, founder of Lyn Alden Investment Strategy and board director of Swan Bitcoin. "Changes in demand tend to have a bigger impact on bitcoin price in any given multi-month period … that's why if you look at the halvings, bitcoin historically does well after halving, but also the sample size for that has been pretty small." In the interim, bitcoin could be weighed down by macro and geopolitical pressures. On Tuesday, the Federal Reserve kicked off its two-day policy meeting . Investors are watching closely to see if the central bank will keep rates higher for longer. Fed Chair Jerome Powell and other policymakers gave recent comments that cemented the notion that rates may not be coming this year as previously expected. Plus, tensions have been rising in the Middle East, and bitcoin has yet to demonstrate that it can disconnect from a 10% sell-off in the major U.S. stock indexes. "The market is pricing out some of the rate cuts they've seen … [and] there's been a bit of a flight to safety because of geopolitical issues," Alden said. "All of that pressures assets that are very tied to liquidity, including bitcoin. It's not the only variable, but it's a big variable, so I would expect probably chopping around at a range for a while longer. But when you look out 12 months or more, I expect probably to see higher liquidity during that time frame." Devin Ryan, director of financial technology research at JMP Securities, acknowledged those pressures but reemphasized the impact ETFs could have on the crypto market. On Tuesday, Hong Kong bitcoin ETFs began trading. Trenchev noted that Australia will likely follow suit and approve bitcoin ETFs sometime this year, and Japan, Singapore and South Korea could also jump on the bandwagon, "spurring further bitcoin adoption across the world." "The macro will ebb and flow – that will matter," he said. "Whether it's the next month or two months, you'll start to see more wealth management firms approve the ETF on their platforms. You're essentially just removing a barrier to huge pools of capital being able to invest – that is going to be the biggest story."