The cryptocurrency market was driven by "Trump trade" sentiment last week, with Bitcoin briefly breaking through $70,000, peaking at $73,000, showing a remarkable upward trend. In contrast, Ethereum lagged far behind Bitcoin due to selling pressure from the foundation, and although the market was very active at one point, on Thursday, due to lower-than-expected US GDP, a rebound in the yen, and rising US bond yields, Bitcoin dipped back down to $70,000. Over the weekend, it continued to decline due to Trump's declining winning chances, retreating to $68,000.
The market's trading focus is still on the election winning probabilities, with only 2 days left until the presidential election on November 5. Traders are actively betting on related concept stocks. Although predictions show a one-sided tilt towards Trump, the reality of polling data shows that both sides are still in a tug-of-war, making the final outcome difficult to predict. However, Trump currently has a higher momentum, which is also favorable for the upward trend of Bitcoin.
It is worth mentioning that the US non-farm payroll report was released last week, showing that only 12,000 new jobs were added, attributed to the impact of hurricanes leading to a sharp decline in new jobs. The unemployment rate remained low at 4.1%. Additionally, this report also revised employment data from previous months, and surprisingly, the trend showed that new jobs in government sectors were still increasing, while employment positions in other industries were decreasing, indicating that the Biden administration is still relying on massive fiscal spending to maintain employment data.
This also means that whether Trump or Harris comes to power, it will be beneficial for the development of cryptocurrencies, albeit in different directions. Trump has always supported cryptocurrencies, so there is not much of a problem; assuming Harris comes to power, she will also follow the existing government's leftist policies to implement loose fiscal measures to maintain economic prosperity. Inflation and the depreciation of the dollar will also boost the value of Bitcoin. The current situation is that no matter who takes office, it will be favorable for Bitcoin to rise, but if Trump wins, it will rise even faster.
In this regard, it is particularly important for Bitcoin to stabilize at $70,000. As long as Trump wins, Bitcoin will immediately rise above $75,000. Assuming Harris comes to power, Bitcoin will also rise in the long term under the push of loose policies. Both parties insist on increasing fiscal spending to boost public opinion, which will be favorable for Bitcoin's long-term trend.
As mentioned in the previous issue, many macroeconomic indicators, political directions, and geopolitical conflicts are favorable for the long-term value growth of Bitcoin. More and more companies are following MicroStrategy's strategy of investing in Bitcoin, trying to earn greater Bitcoin profits for their shareholders.
Although the "Trump trade" is favorable for Bitcoin's rise in the short term, we have also identified several factors that may lead to a short-term decline in Bitcoin. If these bearish factors occur, it will benefit long-term investors to increase their positions at lower costs. Let us next explore the potential bearish factors, among which the hawkish stance of the Bank of Japan may pose a significant short-term risk.
Sources: MICA RESEARCH
A. 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 up Bitcoin prices. He thinks that Chinese investors might turn to Bitcoin to avoid currency depreciation risks due to the depreciation of the yuan, which is a trend similar to the rise in Bitcoin prices following the yuan's depreciation in 2015.
Although the Chinese government officially prohibits direct Bitcoin and yuan transactions, cryptocurrencies can still be traded through P2P transactions on crypto exchanges for Chinese investors, or those with international passports can also trade directly. It is not difficult for wealthy Chinese investors to buy cryptocurrencies, and China's loose policies may stimulate more demand for Bitcoin as a hedge.
The initial stimulus plan will undoubtedly direct funds to the Chinese stock market and the long-declining real estate market, but as the effects of the loose policy become apparent, funds are expected to gradually flow into Bitcoin. Currently, the Chinese government is considering injecting a debt plan of 10 trillion yuan, expected to be approved in early November, which includes 6 trillion yuan of special national bonds to support economic recovery. However, the cost remains that printing money will devalue the currency, potentially further fueling 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 and plans to raise $42 billion in the next three years to purchase more Bitcoin and enhance its shareholders' BTC returns. Currently, MicroStrategy's stock price has reached a historic high of $267, then corrected to $247.
In the third quarter financial report, the company stated that the "21/21 plan" would raise $21 billion through equity issuance, while another $21 billion would come from corporate bonds. MicroStrategy President and CEO Phong Le stated that as a Bitcoin asset company, they plan to use the newly raised capital to purchase Bitcoin as a reserve asset for value, aiming for higher Bitcoin returns.
The company has set its annual BTC return target to be increased to between 6% and 10% and will continue to buy and improve returns through suitable financing. Michael Saylor also announced this month that he hopes to develop the company into a Bitcoin bank with a market value of 1 trillion dollars, and MSTR's stock price continues to hit new highs.
C. November 01: Coinbase's third-quarter trading revenue was below expectations, and the stock price fell by 15%.
Cryptocurrency exchange Coinbase released its latest third-quarter financial report, showing that total revenue for the quarter decreased by 17% to $1.2 billion, and the stock price also fell by 7% in after-hours trading. Among them, trading revenue for the season declined by 27% to $573 million, due to continuous market consolidation and declining volatility from July to September, leading to a slowdown in trading activity and affecting company revenue. Revenue from institutional investors also declined due to increased market competition.
In addition, stablecoin revenue grew by 3% year-over-year to $247 million, with USDC being a highlight, as its supply increased 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 to reduce its excessive reliance on trading revenue to increase revenue stability. The company is also working to increase the number of subscribers for Coinbase One, and Coinbase expects fourth-quarter subscription and service revenue to reach between $505 million and $580 million.
Coinbase views the 2024 US election as an important milestone for cryptocurrency regulation and plans to continue pushing for policy transparency, hoping that policies will favor industry development. It also stated that the company has invested $25 million in Fairshake for the 2026 midterm elections to support crypto-friendly candidates. Currently, the market has not reacted to the potential bullish themes that Bitcoin's October breakthrough of $70,000 may bring.
Short-term political factors will gradually strengthen, and caution against a short-term rebound of the yen is advised.
The Bank of Japan announced the results of its latest interest rate meeting last Friday, maintaining the benchmark interest rate at 0.25%. Overall, there were no changes, which met market expectations. However, the Bank of Japan also released a more hawkish message regarding the continuously declining yen, stating that real interest rates are at low levels, and future interest rate hikes are not ruled out. Of course, this statement is merely intended to scare the market; given the current fiscal situation of the Japanese government, there is no capital to raise interest rates. An interest rate hike would lead to large-scale bankruptcies of domestic small and medium-sized enterprises.
However, excessive leveraged arbitrage trading of the dollar against the yen could still lead to a surge in the yen. This has already happened once this year, when the dollar exchange rate reached 142 yen, leading to a significant withdrawal of capital from the stock market and cryptocurrencies back to Japan, resulting in a considerable price drop. This is a more likely risk; however, the yen will continue to depreciate in the long term, which is not something to worry about in the long run.
Another risk is that oil prices have begun to rise, with WTI breaking through $70 per barrel last Friday, likely triggering market speculation on "inflation revisiting," leading to continued increases in US bond yields, with Bitcoin following suit and declining. This decline is different from the current weakness in long bonds, as investors are worried about US fiscal discipline issues rather than actual inflation, and the two have significantly different impacts on the cryptocurrency market: the former is beneficial for the cryptocurrency market due to declining confidence in the dollar, while the latter limits interest rates at higher levels, which is unfavorable for Bitcoin's rise.
The risks are mostly limited to the aforementioned events, and the market is also waiting for the next wave of Chinese loose policies, hoping that the Chinese government will stimulate the economy through larger-scale stimulus policies. We expect that after multiple rounds of loosening, funds will first flow into the Chinese stock market and real estate, and in the short term, the rise of cryptocurrencies will not be significant. It will be necessary to wait until the side effects gradually manifest to create a bullish scenario, that is, when the yuan depreciates rapidly, the Chinese people will seek hedge products, such as the traditionally most popular gold, and may also acquire Bitcoin through private channels.
Currently, Chinese investors have begun to buy gold in advance, and the confidence of emerging market countries in the dollar continues to decrease, leading many countries to choose to hoard gold. International gold prices are currently approaching recent highs, and Bitcoin and gold are showing similar trends, both rising as hedge products out of government distrust. However, both cannot avoid the sell-off risks brought about by economic downturns, making them quite unique investment products.
Based on observations, we have not changed our assessment of Bitcoin's fair value at $70,000, and it should not be a problem for Bitcoin to stabilize in this range this year. As mentioned in the previous report, current market sentiment is very positive, showing a trend of "institutional buying and retail selling." With the expansion of the interest rate cut cycle next year and fiscal issues, Bitcoin could potentially see prices of $80,000.
Last week's review [MICA RESEARCH] US fiscal issues are heating up, Bitcoin is short-term bearish and long-term bullish.
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"[MICA RESEARCH] Will Bitcoin rise if Trump wins? Pay attention to these 2 potential bearish factors!" This article was first published on (BlockKe).
