Cryptocurrency "leading indicator" Meme stock frenzy surges, will Bitcoin prices follow suit?

According to the Zhitong Finance and Economics APP, despite the volatility in the stock market this week indicating a significant rebound in the cryptocurrency market, the performance of Bitcoin has not synchronized with the meme stock craze from three years ago. In the past two days, the stock prices of GameStop (GME.US) and AMC Theatres (AMC.US) have surged by over 160%, while according to Coin Metrics data, the price of Bitcoin has remained almost unchanged, only slightly dropping by 0.1%. This is in stark contrast to the situation from January to April 2021, when the stock prices of GameStop and AMC Theatres skyrocketed by 821% and 373% respectively, while Bitcoin, although with a smaller increase, also reached 96%.

Nexo co-founder Antoni Trenchev pointed out, "The current situation is different from 2021, when the world was in a lockdown state and there was excessive liquidity in the market." He cautioned that the GameStop frenzy peaked in January 2021, while Bitcoin reached its historical high of $60,000 in April and November of the same year, indicating that Bitcoin and meme stocks may be in different market cycles.

Trenchev believes that if one were to look for clues from the market dynamics of the past 24 hours, the performance of GameStop might be an early indicator of the market trend after Bitcoin's halving.

Further analyzing, Trenchev stated, "The strong data of the U.S. Producer Price Index (PPI) reminds us that the macroeconomic and inflation environment is not conducive to the rise of Bitcoin. After a strong start in early 2024, Bitcoin may continue to fluctuate within a certain range."

It is worth noting that besides Bitcoin, there is a broader cryptocurrency market including meme coins. However, these meme coins have not shown the same market correlation as Bitcoin. According to Coin Metrics data, in the past two days, the price increase of Dogecoin and Shiba Inu coin was around 3%.

In the absence of clear catalysts, Bitcoin is usually considered to be driven by macroeconomic factors, such as the launch of Bitcoin exchange-traded funds (ETFs) in the U.S. or the halving of Bitcoin mining rewards every four years.

"However, the halving event on April 19 did not support the price of Bitcoin. In this halving, there was a change in Bitcoin's programmed monetary policy, namely a halving of the issuance of new coins, restricting the supply."Morgan Stanley strategist Nikolaos Panigirtzoglou believes that the impact of the halving event may have already been priced in by the market. Analysts at the firm believe that the price of Bitcoin is significantly higher than its volatility-adjusted comparison with gold, indicating that the price of Bitcoin could reach $45,000. A more bullish explanation is that past Bitcoin halving events have led to a delayed uptrend in prices.

In addition, Matteo Greco, a research analyst at Fineqia International, wrote in a recent research report: "The recent halving event has resulted in a short-term price decline, following a pattern seen in the past. Typically, this is followed by a 9 to 12-month upward trend, eventually reaching the peak of the market cycle."

Economist and author of the newsletter "Crypto is Macro," Noelle Acheson, added that the rise of meme stocks seems more like a temporary boost in market sentiment rather than a comprehensive market recovery. She believes that macroeconomic issues continue to put pressure on Bitcoin. Acheson predicts that if future inflation data exceeds expectations, it could boost market sentiment, but there is still a high level of uncertainty at present.

This year, the United States approved the launch of the first Bitcoin ETFs, largely driven by the world's largest asset management company, BlackRock. It is expected that these funds will attract new groups of investors, bring in stable capital inflows, and reduce market volatility. The crisis in the U.S. regional banking sector in 2023 marked the beginning of the current Bitcoin cycle, prompting many to reconsider cryptocurrency as an alternative to the traditional financial system and as a hedge against uncertainty.

Acheson stated: "Bitcoin is no longer just seen as a speculative asset. Its value storage properties have become more ingrained, its holder base has broadened, and to some extent, it has been accepted by institutions."

Sylvia Jablonski, CEO and Chief Investment Officer of Defiance ETF, added that although Bitcoin was classified as a meme stock in 2021, the market is now showing a more serious attitude towards Bitcoin.

She pointed out: "The group of investors holding Bitcoin has shifted towards more mature investors, and Bitcoin has become more mainstream in the form of ETFs. Whether retail or institutional investors, they tend to hold both Bitcoin and Ethereum rather than engage in intraday trading."

Figure 2

Bitcoin performed well in the first quarter of this year, with prices reaching close to $73,000 at one point, but has recently experienced a slight pullback. Many investors view this as a healthy market adjustmentGiven the lack of clear catalysts and headwinds in the macroeconomy, these investors warn that the price of Bitcoin may remain calm in the coming months, or even experience further declines.

Trenchard concluded, "The consolidation phase in these markets may last a long time and be very boring. The market narrative of Bitcoin has lost momentum... I do not believe that the revival of the meme stock craze will be a catalyst for the next move in Bitcoin."