The correlation between the US stock market and Bitcoin has always been high. Why have the trends of Bitcoin and US stocks diverged in the past two days? On October 9, the sharp drop in Bitcoin may be related to the new HBO documentary (Electronic Currency: The Mystery of Bitcoin). What is the reason behind this? "Golden September and Silver October", can Bitcoin stage an October offensive? The author believes that although there are indeed many positive signs, overall, some unexpected events may hinder the rise of Bitcoin in October, and overall caution should still be maintained.
Bitcoin and US stocks diverge again; cooling of A-shares may help capital return
The correlation between Bitcoin and the US stock market has always been high, but in the past two days, there has been a divergence again. In the early morning of the 10th Beijing time, the US stock market closed higher on Wednesday, with the Dow Jones and S&P 500 both hitting record highs. Against the backdrop of record highs in the US stock market, Bitcoin continued to fall. What is the reason behind this?
The global financial market is like a plate of water. Wherever there is a money-making effect, there will be a gathering place for funds. There are obvious signs of funds in the crypto market fleeing to the A-share market. Recently, the wave of making money and getting rich in the A-share market has swept the world. On October 8, the turnover of the Shanghai and Shenzhen stock markets exceeded 3 trillion yuan for the first time in history, reaching 3.45 trillion yuan, a significant increase of more than 800 billion yuan compared with September 30. Almost all major sectors rose across the board, among which securities companies and semiconductors broke out collectively. Individual stocks continued to rise in general, with a total of 5,029 stocks rising, 791 stocks hitting the daily limit, and 291 stocks falling. What is even more rare is that on the morning of the same day, hundreds of broad-based ETFs hit the daily limit, and at the same time, the ETF market transaction volume increased. The latest weekly data released by the global fund flow monitoring agency EFPR showed that in the week ending October 2, the emerging market stock funds tracked by EFPR recorded the second largest single-week inflow of funds this year, which was the 18th consecutive week of net inflows, and almost all of these inflows flowed into the Chinese market. David Scatter, senior strategist at Gain Capital, told reporters that the flow of funds is always the most critical, and global investors' positions in the Chinese stock market are still relatively light. He cited Goldman Sachs channel data, saying that although hedge funds have rapidly increased their exposure to the Chinese market recently, they are still at the 55th percentile in the five-year range, while this figure reached the 91st percentile in January 2023. This also means that the drastic changes in the market may cause foreign capital to continue to increase its allocation to the Chinese stock market.
In addition to the continuous large inflow of funds, China has also continued to introduce positive policies. Most people in the A-share market believe that this will be an unprecedented bull market. In addition to the two structural monetary policy tools created by the central bank, in order to implement the new "Nine National Policies", on September 24, the China Securities Regulatory Commission issued (Opinions on Deepening the Reform of the Merger and Acquisition Market of Listed Companies) to further stimulate the vitality of the merger and acquisition market, support listed companies to inject high-quality assets, and enhance investment value; (Listed Company Supervision Guidelines No. 10 - Market Value Management (Draft for Comments)) publicly solicited opinions, requiring listed companies to improve the quality of listed companies and promote the improvement of listed companies' investment value. In addition, on September 26, the Central Financial Office and the China Securities Regulatory Commission jointly issued (Guiding Opinions on Promoting the Entry of Medium- and Long-Term Funds into the Market) to clear the bottlenecks for the entry of social security, insurance, wealth management and other funds into the market, and strive to boost the capital market.
As the investment depression of the global financial market, A-shares are currently showing obvious signs of capital inflow, which also leads to obvious signs of capital flight from the crypto market. This is specifically reflected in the continued negative premium of USDT and the outflow of funds from Bitcoin ETF. However, with the recent surge in A-shares, the market has experienced a correction. It is expected that A-shares will need to go through a period of adjustment, and the outflow of funds from the crypto market is expected to slow down. However, considering the current low valuation of A-shares, it is not ruled out that funds will further flee from the crypto market or reduce investment in crypto assets, which is undoubtedly not conducive to the rise of Bitcoin.
The potential sale of the US government may put pressure on Bitcoin
Since June this year, a major wave of selling of Bitcoin has come from the chain selling pressure caused by the German government, the US government, and the Mt.Gox compensation. Recently, the expectation of US government selling pressure may also become a potential factor in Bitcoin's setback. According to Lookonchain, the US government seems to be free to sell the 69,370 bitcoins confiscated by Silk Road. Previously, on October 7, the US Supreme Court refused to hear the case of Battle Born Investments regarding the ownership of 69,370 BTC (about 4.33 billion US dollars) seized from Silk Road, giving the government full control over the seized funds.
The author believes that the Biden administration in the United States may not be very friendly to the crypto market, and the US government seems likely to sell off. The last time the US government sold off can be traced back to two months ago, when the US government moved 29,800 BTC (about $2.02 billion), of which 10,000 BTC (about $594 million) were transferred to Coinbase Prime. The market is also concerned about the prospects of cryptocurrencies after the victory of Democratic Party Harris. Bernstein analysts said: If Kamala Harris wins, Bitcoin may test the $40,000 range again.
In addition to the potential selling pressure from the U.S. government, HBO's new documentary (Electronic Currency: The Mystery of Bitcoin) may also cause some panic in the market and become the main reason for the decline of Bitcoin on October 9. This new HBO film is directed by Cullen Hoback, a famous director known for solving mysteries. It mainly attempts to reveal the identity of Satoshi Nakamoto, which has aroused widespread concern in the market. Currently, the Bitcoin held by Satoshi Nakamoto is worth $68 billion, which is an extremely large number. For the market, if it is really confirmed that this person is the founder of Bitcoin, it is certainly an exciting thing, but this may not be the case for the market.
HBO's new documentary is extremely controversial. Cullen Hoback believes that there is sufficient evidence that Peter Todd is Satoshi Nakamoto, but most professionals in the crypto market disagree. Some professionals pointed out that HBO got Peter Todd's timeline wrong throughout the documentary, and mistakenly thought he was Satoshi Nakamoto. In fact, Peter Todd was not yet 16 years old in 2008, which is very inconsistent with his age. His life and experience are also very different from the Satoshi Nakamoto that everyone knows. What's more, Todd has long served as a consultant for many projects. If he is really Satoshi Nakamoto, his Bitcoin wallet cannot have remained completely untouched for so many years. Peter Todd himself is also extremely dissatisfied and publicly denies that he is Satoshi Nakamoto. He has repeatedly stated on social media that Hoback's theory is ridiculous.
September and October are the best months of the year? Bitcoin still needs technology to drive it
Although Bitcoin has performed weakly recently, the market remains optimistic about its future performance. In addition to the Fed’s interest rate cut, the main support is the growth of USDT’s market value.
Data from CryptoQuant shows that stablecoin liquidity continued to grow to a record $169 billion at the end of September, up 31% year-to-date (YTD). The dominant players remain Tether's USDT, which increased its market cap by $28 billion to nearly $120 billion, accounting for 71% of the market, and Circle's USDC, which increased its market cap by $11 billion to $36 billion, up 44% year-to-date, accounting for 21% of the market. The record number of USD stablecoins and the surge in large Bitcoin transactions could set the stage for a broader rally in BTC in the coming weeks, keeping the asset's bullish seasonality intact in October.
The author believes that the current bull market expectations for A-shares are very obvious, and the global financial market has continued to hype up the expectations for A-shares, which will essentially lead to capital outflows or reduced investment in the crypto market. In addition, the results of the US election will have a very important impact. If Trump is elected, due to his active embrace of cryptocurrencies, this will undoubtedly be a direct stimulus to Bitcoin; but if Harris is elected, then the result of Bitcoin is hard to say, and further deep corrections cannot be ruled out, and this will not happen until November. Overall, the author is cautious about the market of Bitcoin in October. From a longer-term perspective, the crypto market still needs to be driven by technology, and it is difficult for pure financial stimulus to form sustained prosperity.
