Dispatch #217: Bitcoin: A Week of Waves Ahead

In this patch of your weekly Dispatch:

Volatility incoming
Crypto validated
Fed’s November cut

Market cast

Bitcoin bulls in the background?

Bitcoin continues to operate within a bullish trend channel on the daily chart, with a support level established around $66,500. Should this support hold, analysts anticipate another test of the all-time high of $73,200, which is viewed as a critical resistance level for sustaining bullish momentum. The price is currently positioned near the middle band (20-period SMA) of the Bollinger Bands indicator, suggesting potential stabilization and the possible conclusion of the recent trend correction. While most moving averages indicate a strong buy signal, oscillators remain neutral. With the upcoming U.S. elections and expected rate cuts, increased volatility and trading volumes are anticipated.

The big idea

Crypto – here to stay

If you follow our updates regularly, you're likely interested in the future of crypto, like us. We all want to know how the most innovative asset class progresses. While it’s nearly impossible to deliver concrete projections, sometimes it’s the big picture – or the 'Big Idea' – that provides reassurance. For those seeking validation, it hardly gets better than acknowledgment from the chief financial officer of a U.S. state, like Florida’s Jimmy Patronis.

Recently, Patronis directed the State Board of Administration to invest in Bitcoin as a hedge against currency inflation and a safeguard against central bank digital currencies. “Crypto is not going anywhere,” he stated. “It's not going to contract – it's going to continue expanding – and I think we'd be foolish if we're not prepared to harness the opportunities there.” He also warned that ignoring the rise of crypto would be a mistake: “If you’re not paying attention to it, you’re making a mistake.”

Bitcoin

The 8%-high market waves

As the U.S. election approaches, Bitcoin is experiencing a surge in volatility that has traders on high alert. The 30-day volatility gauge for Bitcoin has reached its highest level since August, with media reports suggesting potential price movements of around 8% in either direction following the vote – significantly more than the typical 2% swings. This uncertainty is compounded by shifting political dynamics, particularly concerning former President Donald Trump, whose prediction market odds have dropped amid tightening race results against Vice President Kamala Harris. Traders brace for rapid fluctuations as external factors influence Bitcoin's price action and the broader crypto market.

Ethereum

The Amazon of crypto companies?

Analysts at 21Shares argue that Ethereum is at a pivotal moment akin to Amazon's emergence in the 1990s, when its potential was largely overlooked. Since the launch of spot Ether ETFs in July, inflows have been modest compared to those of Bitcoin ETFs. 21Shares researchers suggest that larger investments in Ethereum will materialize as its use cases become clearer.

Currently, Ethereum boasts a market capitalization of $320 billion, only 6.25% of Amazon's valuation. However, it significantly outpaces Amazon's early workforce with over 200,000 active developers today, compared to Amazon’s 7,600 in its formative years. Despite facing competition from other platforms, analysts remain optimistic that Ethereum's diverse applications may lead it to transform the digital landscape much like Amazon did for e-commerce.

TradFi trends

UBS joins the blockchain

With BlackRock solidly embracing the emerging trend of tokenization, it was only a matter of time before other major financial institutions followed suit. Now, UBS has launched its first tokenized fund, “uMINT”, on the Ethereum blockchain, continuing the trend of traditional financial giants embracing blockchain technology. This fund brings institutional-grade cash management to a decentralized platform, using money market instruments within a risk-managed framework. The launch is part of UBS's broader “UBS Tokenize” initiative, which has already seen the bank issue digital bonds and execute cross-border transactions using blockchain.

Macroeconomic roundup

The Fed’s next cut

The U.S. Federal Reserve's interest rate decision is due this Thursday, and ING analysts anticipate that the Fed will implement a 25 basis point cut on November 7, regardless of the outcome of the U.S. presidential election. The Fed is shifting its focus from inflation concerns to a cooling job market, allowing for continued rate cuts to reach a more neutral policy level. After a 50 basis point cut in September, ING expects the Fed to cut rates again in December, totaling 100 basis points for the year.

The week’s most interesting data story

Cautiously optimistic in the charts?

At the end of October, Bitcoin surged past $72,000, its highest level since June, coinciding with a record spike in Bitcoin futures open interest (OI). This indicates heightened market activity from traders and investors. While elevated OI can lead to increased volatility, funding rates in the futures market remain below March peaks, suggesting that the market is cautiously optimistic rather than overheated.

The numbers

$901 million in crypto investment inflows were recorded last week, marking one of the best-performing weeks.
$7.7 billion is Tether's year-to-date net profit, supported by strong gold holdings and excess reserves.
$2.68 billion is the total value of crypto assets set to be unlocked in November.
12,000 jobs were added in the U.S. nonfarm payrolls, a significant miss compared to the expected 106,000.
$42 billion is MicroStrategy's planned capital raise by 2027 to expand its Bitcoin holdings.

Hot topics

What the community is discussing

Some refreshing food for thought…

Is this free Bitcoin mining then?

Bernstein have it figured out.

Dispatch is a weekly publication by Nexo, designed to help you navigate and take action in the evolving world of digital assets. Discover insights and opportunities shaping crypto's role in driving the next generation of wealth. To share your Dispatch suggestions and comments, email us at [email protected].