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| By Marija Matic |
Turbulence is certainly the word of the day. I’d argue it should be the word for the past week. Everything from the surging bond yields to geopolitical tensions are exacerbating investors’ concerns, and for good reason.
Given this uncertainty, those looking to safeguard their portfolios might find strong allies in the form of gold and Bitcoin (BTC, “A-”).
It’s not newsworthy to say that volatility and uncertainty send investors flocking to the relative safety of gold. And the correlation between gold and Bitcoin has been well noted. While not perfect, the two assets do tend to move together in tumultuous times.
But there’s a possibility that we may see the beginnings of that correlation breaking … in Bitcoin’s favor. Jefferies analysts have warned that the Federal Reserve will be forced to restart its money printer. That, in turn, could potentially hurt the U.S. dollar and fuel a Bitcoin price boom to rival gold.
And now that institutions can more easily invest in Bitcoin, the crypto now “represents an alternative store of value to gold,” according to that same Jefferies report.
The surge in institutional interest is primarily driven by BlackRock, the world's largest asset manager, which has submitted an application for a Bitcoin spot ETF.
And that surge is proven by the data. Looking at the shorter time frame, we can see that digital asset investment products saw inflows for the second week totaling $78 million, according to Coinshares data. This reflects a resurgence of positive sentiment toward cryptocurrencies among institutional investors.
Interestingly, the regional divide continues, with 90% of inflows coming from Europe, while the U.S. and Canada saw just $9 million inflows combined, suggesting a continued divergence in sentiment.
An interesting note is that Solana (SOL, “C-”) saw its largest week of inflows — $24 million — since March 2022, continuing to assert itself as the altcoin of choice among the institutions.
Additionally, trading volume for Exchange-Traded Products surged by 37% to reach $1.13 billion for the week. Moreover, Bitcoin trading volumes on reputable exchanges increased by 16%.
However, for all this bullish sentiment, the BTC/USDT chart reveals that BTC’s price has been stagnating lately after starting the month strong by breaking out of a descending resistance pattern.
At the time of writing, BTC is near $27,600. Meanwhile, $29,500 looks like the next target in a bullish scenario.
This tells me that while the current turbulence is enough to get institutions to consider Bitcoin as a safe-haven opportunity, we’ll need more than fear to act as a catalyst to push prices higher.
Ethereum (ETH, “B”) has on the other hand struggled to maintain its key support of $1,660 and has since fell below this mark.
The reason for ETH losing almost all its October gains was the subpar launch of Ethereum futures ETFs in the U.S., which garnered just under $10 million in its inaugural week.
This reflects lukewarm interest, particularly when compared to the debut of the Bitcoin futures-based ETF, which raked in $1 billion during their first week. It's worth noting however that the Bitcoin futures ETF was introduced in October 2021, close to the peak of the bull market.
The ETH/USDT chart indicates a potential retest of a descending resistance level that was breached in late September. A bounce from this level would be favorable … but true bullish momentum can only materialize upon breaking above the $1,750 mark.
However, on a higher time frame, it’s notable that ETH has been in the descending channel since April:
For the descending channel to favor a bullish year-end scenario, Ethereum must uphold the lower channel boundary, presently positioned at $1,530, since it serves as the critical level signifying a bullish bias.
With the latest rally seemingly running out of momentum, BTC and ETH stagnating isn’t too worrisome. But we’ll need to watch carefully to see if either regains that momentum before the end of the year … or if we’ll need to wait until 2024 to see the next big move up.
Notable News, Notes & Tweets
- The rise of Ethereum Layer-2s is helping to take revenue away from ETH competitors. As such, many Ethereum rivals might be running on borrowed time and may not recover in the next bull market cycle, according to Bloomberg crypto market analyst Jamie Coutts.
- While fighting a legal battle with the Securities and Exchange Commission, Binance crypto exchange has sold off their entire business in Russia to a possible shell company.
- Caroline Ellison, the star witness and the former girlfriend of FTX co-founder Sam Bankman-Fried, is due to take the stand at his fraud trial as soon as Tuesday.
What’s Next
Looking at the technical data, Bitcoin's break above its descending resistance trendline signals a potential move toward $29,500 in a bullish scenario. Conversely, Ethereum faces challenges but can maintain a bullish bias if it stays above the critical $1,530 level.
The Federal Reserve's possible return to monetary easing in light of the tumultuous bond market carries significant implications, potentially reinforcing Bitcoin's status as an inflation hedge alongside gold.
As investors, I urge you to closely observe the broader macroeconomic context and factor it into your strategy. Alternatively, you can continue checking in with our Weiss Crypto Daily content, where the entire Weiss Crypto team works tirelessly to keep you up to date with every development that could impact your crypto journey.
The upcoming week is of exceptional significance, featuring events such as the World Bank-IMF annual meeting and the release of the IMF's latest world economic outlook.
Additionally, crucial data releases and keynote addresses are scheduled, setting the stage for an intriguing week ahead with the potential for heightened market volatility.
I hope you make checking in a part of your daily routine during this exciting week.
Best,
Marija
