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The price of Bitcoin is struggling to surpass the $64,000 mark, where the important 200-day moving average lies, despite a slight increase in October. This challenge is partly due to global socio-political uncertainties, pushing investors towards stocks and seeking safety in cash. Although there is a correlation between the growing U.S. debt and Bitcoin’s performance, this effect seems to have little influence on short-term cryptocurrency fluctuations. At the same time, the strengthening of the U.S. dollar against other major currencies and global economic forecasts also play a significant role in this stagnation. However, the strong buying volume at the $60,000 level is encouraging. All these factors keep Bitcoin in the same broad consolidation channel it has been in for several months. It remains in search of a trigger that could push it in one direction or another.
As they do every month, Bitcoin traders are preparing for the imminent release of U.S. Consumer Price Index (CPI) data, as these numbers could influence Bitcoin’s next price move. The CPI, which measures inflation, plays a crucial role in the Federal Reserve’s interest rate decisions. If inflation continues to slow, it could prompt the Fed to adopt a more accommodative monetary policy, which would benefit risk assets like Bitcoin. Conversely, a rise in inflation could lead to stricter policy, weighing on cryptocurrencies. In October, despite an uncertain start, Bitcoin found support around $60,000, helped by solid U.S. economic data, particularly nonfarm payroll figures. Analysts at QCP Capital noted that Bitcoin’s progress, dubbed “Uptober,” seems to be getting back on track. However, the market remains focused on CPI data, as lower inflation could encourage speculative investments, while higher inflation would make investors more cautious.
Historically, Bitcoin has shown significant volatility in response to CPI data. According to blockchain expert Anndy Lian, positive CPI results, reflecting a healthy economy, have often boosted Bitcoin’s price. However, higher-than-expected inflation figures could raise concerns about tighter monetary policy, negatively affecting the cryptocurrency market.
Crypto.com has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) after receiving a legal notice from the regulator. The cryptocurrency company announced it had received a “Wells notice,” a warning that the SEC plans to take legal action over alleged securities violations. Crypto.com contests these accusations, criticizing what it considers unjust regulation through enforcement by the SEC. In its statement, Crypto.com explained that its decision to sue the SEC stems from what it perceives as inappropriate and unauthorized actions by the agency, which continue despite signs of a potentially more favorable approach to the crypto industry under the next U.S. administration. The company asserts that, while these measures are unprecedented, they have become unavoidable in light of the SEC’s repeated actions against the sector.
The U.S. Bankruptcy Court has approved a plan allowing the cryptocurrency platform FTX to repay $16 billion to its former clients, after nearly two years of recovery efforts. This decision follows the sudden collapse of FTX in November 2022, triggered by a liquidity crisis. Once a prominent brand in the crypto world, FTX rapidly went bankrupt, leading to the arrest of its co-founder, Sam Bankman-Fried, who is currently serving a 25-year prison sentence for fraud and mismanagement. The repayment plan will allow most customers to recover at least 118% of the dollar value in their accounts as of November 2022. Although customers initially expected to receive their digital assets, the plan, filed in May, provides for cash repayments. Some investors expressed dissatisfaction at not receiving their original cryptocurrencies, some of which, like Bitcoin, have appreciated in value over the past two years.
The U.S. Supreme Court has declined to hear a case concerning the ownership of 69,370 bitcoins seized from the Silk Road dark web marketplace, clearing the way for the U.S. government to sell the $4.38 billion worth of BTC. The case was initiated by Battle Born Investments, a company that claimed it had acquired rights to the seized bitcoins through a bankruptcy settlement. Battle Born argued that the debtor, Raymond Ngan, was “Individual X,” a person who allegedly stole these bitcoins from Silk Road, but the courts dismissed the claim, ruling that Ngan’s identity as “Individual X” was not proven. The Supreme Court’s decision means that Battle Born’s challenge has reached its end, leaving the government free to sell the seized bitcoins. The U.S. government has already moved large amounts of bitcoins, such as the $2.6 billion transferred between July and August, likely in preparation for sale. These massive cryptocurrency sales by governments raise concerns about their potential impact on market volatility. The fate of the seized bitcoins has also become a political issue in the U.S. During a cryptocurrency conference in July, former president Donald Trump stated that if re-elected, he would ensure the U.S. keeps 100% of the bitcoins held or acquired by the government, considering the creation of a strategic bitcoin reserve.
PayPal completed its first business transaction using its PYUSD stablecoin, paying an invoice to the accounting firm Ernst & Young. This move aims to demonstrate the simplicity and efficiency of commercial payments using U.S. dollar-backed digital currencies. Steve Everett, PayPal’s Director of Market Development, emphasized that business-to-business (B2B) payments are an area where digital currencies can add significant value, enabling faster and smoother transactions. The funds were transferred to Ernst & Young’s Coinbase account. Although PayPal launched PYUSD over a year ago, its market capitalization has recently decreased from over $1 billion to approximately $716 million. Compared to stablecoin giants like Tether (USDT) and Circle (USDC), PYUSD remains relatively small. However, PayPal continues to develop initiatives and partnerships to boost the usage of its stablecoin. The company recently announced new options for U.S. businesses to buy, sell, hold, and transfer cryptocurrencies, highlighting the advantages of instant payments offered by digital currencies.
HBO’s upcoming documentary, “Money Electric: The Bitcoin Mystery,” promises to reveal the identity of Satoshi Nakamoto, Bitcoin’s pseudonymous creator. Among the leading candidates speculated by the Polymarket betting platform are three cypherpunk cryptographers: Adam Back, Nick Szabo, and Len Sassaman. These influential figures in the cryptographic community have been at the center of speculation for years about Satoshi’s true identity. However, previous attempts to uncover Nakamoto’s identity, such as linking Craig Steven Wright or Dorian Nakamoto to Bitcoin, have been debunked, adding to the mystery. Len Sassaman, who died in 2011, has been connected to Bitcoin’s creation due to his contributions to cryptography, particularly PGP encryption and remailers. The timing of his suicide shortly after Satoshi’s withdrawal also fueled speculation. However, his widow, Meredith L. Patterson, has repeatedly stated that she does not believe Sassaman was Satoshi. Adam Back, on the other hand, is often mentioned due to his role in developing proof-of-work, a fundamental concept for Bitcoin, but he has consistently denied being Satoshi, arguing that preserving Satoshi’s anonymity is beneficial for Bitcoin’s “founderless” nature.
Speculation about Satoshi Nakamoto’s identity is motivated by the potential implications for the cryptocurrency market. If Satoshi is confirmed deceased, more than a million bitcoins he mined would remain inaccessible, a factor some consider potentially bullish for Bitcoin. However, many within the Bitcoin community believe that the mystery of Satoshi’s identity is less important than the overall impact of the technology he created.
According to J.P. Morgan, rising geopolitical tensions and uncertainties surrounding the upcoming U.S. presidential elections could push investors towards safe-haven assets like gold and Bitcoin. The bank’s analysts describe this trend as the “debasement trade,” a strategy favoring assets resistant to currency devaluation. In response to recent geopolitical events and falling U.S. Treasury yields, the price of gold has surged, nearing $2,700 in September. The analysis highlights that gold’s rise is influenced by a 4-5% decline in the dollar and a reduction in real U.S. Treasury yields by 50-80 basis points. However, gold’s price increase exceeds these factors, reflecting a resurgence of the “debasement trade.” This phenomenon is driven by persistent inflation concerns, large government deficits, and declining confidence in fiat currencies, especially in emerging markets.
While gold has benefited from these conditions, Bitcoin has not seen similar gains, according to CryptoQuant’s analysis. While gold’s price has risen due to declining yields, Bitcoin currently shows a negative correlation with gold, suggesting that the “digital gold” has yet to follow the same trajectory in this economic context.
This transition of Bitcoin into the role of digital gold is a scenario we consider highly probable and important for Bitcoin’s future. Presumably, we are not alone, as a recent BlackRock paper titled “Bitcoin: A Unique Diversifier” elaborates on these key points:
- Investors considering allocating to bitcoin are grappling with how to analyze it relative to traditional financial assets, given bitcoin’s unique properties and limited history.
- Bitcoin, with its high volatility, is obviously a “risky” asset on a standalone basis. However, most of the risk and potential return drivers bitcoin faces are fundamentally different from traditional “risky” assets, making it unfitting for most traditional finance frameworks – including the “risk on” vs. “risk off” framework employed by some macro commentators.
- Bitcoin’s nature as a scarce, non-sovereign, decentralized global asset has caused some investors to consider it as a flight to safety option in times of fear and around certain geopolitically disruptive events.
Over the long term, bitcoin’s adoption trajectory is likely to be driven by the intensity of concerns over global monetary stability, geopolitical stability, U.S. fiscal sustainability, and U.S. political stability. This is the inverse of the relationship that is generally attributed to traditional “risk assets” with respect to such forces.
The recent decline in stocks linked to the Chinese market, due to the lack of new stimulus measures from Beijing, could drive a shift in investment towards the cryptocurrency market, according to analysts at QCP Capital. After nearly two weeks of gains supported by Chinese economic measures, stocks like Alibaba and JD.com dropped by 8% and 12%, respectively, leading to the biggest decline in Hong Kong stocks since 2008. This situation creates an opportunity for investors to reallocate their capital to cryptocurrencies, a sector increasingly viewed as a mature alternative risk asset.
Furthermore, analysts at K33 estimate that the approval of FTX’s reorganization plan could inject around $2.4 billion into the cryptocurrency market, strengthening the outlook for a bullish end of the year for Bitcoin. They predict that the first payments, totaling around $1.2 billion, will be made to small creditors by the end of the year, while payments to larger creditors are expected to occur in early 2025. Out of the $14 to $16 billion in claims, the analysts estimate that a significant portion will not return directly to the market, but approximately 20% to 40% of the remaining funds, or $2.4 billion, could be reinvested in cryptocurrencies, given that many creditors are native investors in this sector.
Despite this bullish outlook for Bitcoin, altcoins are struggling to follow the same trend. Bitcoin, which has gained 40% since the beginning of the year, is seeing its market dominance increase, while assets like Ether and other altcoins have not performed as well. Investor caution regarding these alternative assets is also reflected in the premiums on Bitcoin futures contracts, which remain higher than those for Ether, underscoring optimistic expectations for the end of 2024.
The presented information is as of October 8th, 2024, unless otherwise indicated and is provided for information purposes only. The information comes from sources that we believe are reliable, but not guaranteed. This statement does not provide financial, legal or tax advice. Rivemont Investments are not responsible for any errors or omissions in the information or for any loss or damage suffered.
