Although the 'Trump trade' is favorable for Bitcoin's rise in the short term, we have also identified several factors that could potentially cause a decline in Bitcoin in the short term. If these bearish events occur, it will benefit long-term investors to increase their positions at a lower cost. Let's explore the potential bearish factors.
The cryptocurrency market was driven last week by 'Trump trade' sentiment, with Bitcoin briefly breaking $70,000 and reaching a high of $73,000, showing a remarkable increase. In contrast, Ethereum lagged far behind Bitcoin due to the foundation's sell-off, with price growth significantly trailing Bitcoin. Although the market was quite active for a time, it faced downward pressure on Thursday due to lower-than-expected U.S. GDP, a rebound in the yen, and rising U.S. bond yields, causing Bitcoin to test $70,000. Over the weekend, it continued to decline due to Trump's decreasing winning odds, retreating to $68,000.
Market trading remains focused on election winning probabilities, with only 2 days left until the presidential election on November 5. Traders are actively betting on related concept stocks. While the prediction market overwhelmingly leans towards Trump, the reality of polling data shows that both sides are still in a tug-of-war. It is still difficult to say who will win, but Trump currently has a significant advantage in momentum, which would also be beneficial for the upward trend of Bitcoin.
It is worth mentioning that the U.S. non-farm payroll report was released last week, showing that only 12,000 new jobs were added, attributed to the impact of hurricanes causing a rapid decline in new jobs. The unemployment rate remains low at 4.1%. Additionally, there was a revision of past months' employment report data, revealing an unexpected trend where new jobs in government sectors are still increasing while jobs in other industries are decreasing, indicating that the Biden administration is still relying on massive fiscal spending to maintain employment data.
This also means that whether Trump or Kamala Harris comes to power, it will be beneficial for the development of cryptocurrencies, albeit in different directions. Trump has always supported cryptocurrencies, so there are not many issues; if Kamala Harris comes to power, she will also follow the existing government's leftist policies to implement expansionary fiscal measures to maintain economic prosperity. Inflation and the depreciation of the dollar will also boost Bitcoin's value. The current situation is that it will be beneficial for Bitcoin to rise regardless of who comes to power, but if Trump wins, the increase will be faster.
In this regard, Bitcoin stabilizing at $70,000 is particularly important. As long as Trump wins, Bitcoin will immediately rise above $75,000. If Kamala Harris comes to power, Bitcoin will also rise in the long term due to expansionary policies. Both parties insist on increasing fiscal spending to enhance public opinion, which will be beneficial for Bitcoin's long-term trend.
As mentioned in the previous report, many macroeconomic indicators, political routes, and geopolitical conflicts are favorable for the long-term value growth of Bitcoin. More and more companies are mimicking MicroStrategy's strategy to invest in Bitcoin, attempting to generate greater Bitcoin profits for shareholders.
Although the 'Trump trade' is favorable for Bitcoin's rise in the short term, we have also identified several factors that could potentially cause a decline in Bitcoin in the short term. If these bearish events occur, it will benefit long-term investors to increase their positions at a lower cost. Next, let's explore the potential bearish factors, among which the Bank of Japan's hawkish stance may pose a significant short-term risk.
A. On October 30, Arthur Hayes: China's loose policy will stimulate Bitcoin demand.
Arthur Hayes, co-founder of BitMEX, believes that China's upcoming debt issuance and monetary expansion policies may drive Bitcoin prices higher. He thinks Chinese investors may transfer their funds to Bitcoin to avoid currency depreciation risks due to the depreciation of the RMB. This trend is similar to the situation in 2015 when the RMB depreciated and Bitcoin's price rose.
Although the Chinese government officially prohibits direct Bitcoin and RMB transactions, for Chinese investors, cryptocurrencies can still be traded through P2P exchanges or directly if they have an international passport. It is not difficult for wealthy Chinese investors to buy cryptocurrencies, and China's loose policies may stimulate more demand for Bitcoin as a safe haven.
The initial stimulus plan will undoubtedly direct funds towards the Chinese stock market and long-declining real estate. However, as the effects of loose policies become evident, funds are expected to gradually flow toward Bitcoin. The Chinese government is currently considering injecting 10 trillion yuan in debt, which is expected to be approved in early November, including 6 trillion yuan in special bonds to support economic recovery. However, the cost remains that money printing will lead to currency depreciation, which may further fuel demand for Bitcoin in the Chinese market.
B. On October 31, MicroStrategy announced it would raise $42 billion to invest in more Bitcoin.
MicroStrategy (MSTR) released its financial statements on Wednesday, revealing that the company continues to increase its Bitcoin holdings. It also plans to raise $42 billion over the next three years to buy more Bitcoin and increase its shareholders' BTC returns. Currently, MicroStrategy's stock price has reached a historic high of $267, before correcting to $247.
In the third-quarter financial report, the company stated that this '21/21 plan' will raise $21 billion through equity issuance, with another $21 billion coming from corporate bonds. MicroStrategy President and CEO Phong Le stated that as a Bitcoin asset company, it plans to use the newly raised capital to buy Bitcoin as a value reserve asset, aiming for higher Bitcoin returns.
The company has set an annual BTC return target increased to between 6% and 10%, and will continue to buy and increase returns through appropriate financing. Michael Saylor also announced this month that he hopes to develop the company into a Bitcoin bank with a market value of one trillion dollars. MSTR's stock price continues to set new highs.
C. On November 1, Coinbase's third-quarter financial report showed trading revenue fell short of expectations, with stock prices dropping 15%.
Cryptocurrency exchange Coinbase has released its latest third-quarter financial report, showing that total revenue for the quarter fell 17% to $1.2 billion, and the stock price also dropped 7% after hours. Trading revenue for this quarter decreased by 27% to $573 million due to ongoing market consolidation and reduced volatility from July to September, which resulted in slowed trading activity and affected company revenue. Revenue from institutional investors also declined due to increased competition in the market.
In addition, stablecoin revenue increased by 3% to 247 million dollars, especially highlighted by USDC, whose supply has grown by 43% since the beginning of the year, while Tether's supply increased by 32% during the same period. It is noteworthy that the company is working hard to reduce its over-reliance on trading revenue to increase revenue stability. The company is striving to increase the number of subscribers for Coinbase One, and Coinbase expects subscription and service revenue in the fourth quarter to reach between 505 million and 580 million dollars.
Coinbase views the 2024 U.S. election as an important milestone for cryptocurrency regulation and plans to continue promoting policy transparency, hoping the policies will favor industry development. The company has also invested $25 million in Fairshake to support crypto-friendly candidates for the 2026 mid-term elections. Currently, the market has not reacted to the potential positive factors that Bitcoin may bring after breaking $70,000 in October.
Short-term political factors will gradually strengthen, and caution should be taken against a short-term rebound of the yen.
The Bank of Japan announced the results of its latest interest rate meeting last Friday, maintaining the benchmark interest rate at 0.25%, which was overall unchanged and aligned with market expectations. However, the Bank of Japan also released a more hawkish message regarding the recent continuous depreciation of the yen, stating that real interest rates are at low levels and that there may still be possibilities for future interest rate hikes. Of course, this statement is merely meant to intimidate the market; given the current fiscal situation of the Japanese government, there is no capital for rate hikes, and once rates rise, it would lead to a large-scale bankruptcy of domestic small and medium-sized enterprises.
However, excessive leveraged arbitrage trading of the dollar against the yen may still lead to a sharp rise in the yen. This has already happened once this year, when the dollar exchange rate reached 142 yen, leading to a significant withdrawal of funds from the stock market and cryptocurrencies back to Japan, resulting in a substantial price drop. This is a risk that is likely to occur, but the yen will continue to depreciate in the long term, which is not a concern in the long run.
Another risk is that oil prices are starting to rise. WTI broke through $70 per barrel last Friday, which may trigger market speculation about 'inflation returning,' leading U.S. bond yields to continue rising, causing Bitcoin to decline. This decline is due to different reasons than the current weakness in long-term bond prices; investors are worried about U.S. fiscal discipline rather than actual inflation. The impact of these two factors on the cryptocurrency market is quite different: the former benefits the cryptocurrency market due to decreased confidence in the dollar, while the latter limits interest rates at higher levels, which is unfavorable for Bitcoin's rise.
The risks seem to be limited to the aforementioned events. Additionally, the market is also waiting for the next round of China's loose policy, hoping the Chinese government will stimulate the economy through larger-scale stimulus measures. We expect that after several rounds of easing, funds will first flow into the Chinese stock market and real estate, and the rise of cryptocurrencies will not be significant in the short term. It will take time for side effects to gradually emerge and form positive factors, such as when the RMB depreciates rapidly, the Chinese people will seek safe-haven assets, such as traditionally popular gold, and may also acquire Bitcoin through private channels.
Currently, Chinese investors have started to prepare to buy gold in advance, and the confidence of emerging market countries in the dollar continues to decline, leading many countries to choose to hoard gold. International gold prices are currently touching recent highs, and Bitcoin and gold are showing similar trends, both rising as safe-haven assets due to distrust in the government. However, both cannot avoid the selling risks brought about by an economic downturn and are considered quite unique investment products.
Upon observation, we have not changed our assessment of Bitcoin's fair price at $70,000. Bitcoin should have no problem stabilizing within this range this year. As mentioned in the previous report, market sentiment is very positive, showing a trend of 'institutional buying and retail selling.' With the expansion of interest rate cuts next year and fiscal issues, Bitcoin may potentially reach $80,000.
