A number of favorable factors have boosted the global demand for non-US dollar safe-haven and inflation-resistant assets. The rise in Bitcoin and other cryptocurrencies is not too exaggerated. Instead, the real buying is buying Bitcoin assets. Let's try to analyze the reasons.
Bitcoin has continued to rise recently, with the price reaching around $69,000. At the same time, gold is also one of the assets that has risen sharply, indicating that current investors have strong demand for "gold and gold-like" commodities. Because there are many positive factors pushing up the global demand for non-US dollar safe-haven and anti-inflation assets, the rise in Bitcoin and other cryptocurrencies is not too exaggerated. Instead, the real buying is buying Bitcoin assets. Let us try to analyze the reasons.
First, the U.S. economy is strong and is in a cycle of interest rate cuts. This week, the U.S. released the latest strong retail sales report in September, which boosted investors' confidence in the Federal Reserve's (Fed) successful soft landing. The results showed that retail sales in September increased by 0.4% month-on-month, higher than the market expectation of 0.3% and higher than 0.1% in August; core retail sales increased by 0.7%.
In addition, the number of initial jobless claims unexpectedly fell last week. Analysts pointed out that the strong retail data and the impressive employment data broke the market bears' threats of a weak US economy. However, even if the US economy is strong, the Fed's goal is to achieve a soft landing, so it will continue to take preventive interest rate cuts. Analysts generally believe that unless the hurricane has a major impact on the labor market, there is a possibility of a rate cut at the next meeting.
As we mentioned before, U.S. consumer demand and real wage growth are driving economic acceleration. As international oil prices fall, the Fed has more leverage to cut interest rates without worrying about resurfacing inflation. In the end, lower oil and energy prices can offset each other. The risk of cutting interest rates now is much lower than standing still or raising interest rates. All signs point to the Fed continuing to cut interest rates, it's just a matter of how fast.
Therefore, investors have strong expectations for the easing of the US dollar, and funds naturally move towards anti-inflation assets. Gold and Bitcoin have become the most popular investment targets. The price of gold has exceeded US$2,700 per ounce this week, and the price of Bitcoin has also risen to US$68,000. Ethereum has stabilized at US$2,700. This wave of buying funds is real and the leverage component is not high. Most investment channels flow in through ETFs.
According to Farside data, Bitcoin spot ETFs have seen net inflows for five consecutive days in the past week, with the average daily amount exceeding US$400 million, a rare large inflow, indicating that institutional investors' demand for Bitcoin is rising. Considering that the market has successfully digested the negative pressure from short-term investors' profit-taking, the chances of cryptocurrencies rising in the future are much greater than those falling.
A. CoinShare on October 15: Trump's poll numbers rise after the vice presidential debate, Bitcoin rises to $66,000
According to the latest report from CoinShares, the cryptocurrency market is mainly affected by the upcoming US election, especially after the vice presidential debate, the Republican Party performed significantly better than the Democratic Party, causing Trump's poll numbers to rebound and gradually widen the gap with Kamala Harris. Since Trump is seen as a candidate who supports cryptocurrencies, investors have invested $407 million in digital asset products in the past week.
As the presidential election is about to enter the final stage, the market has changed recently. The market predicts that the Republican Trump's chances of winning have increased, surpassing the Democratic candidate Kamala Harris. The capital flow data shows that the United States is the main inflow market, accounting for $406 million. As a result, the price of Bitcoin has risen to more than $66,000. Other countries such as Canada, Australia and Germany also have a small amount of capital inflow.
Bitcoin attracted $419 million in inflows, while inverse Bitcoin investment products saw $6.3 million in outflows. Ethereum was an exception, with $9.8 million in outflows last week. It is clear that the price of cryptocurrencies may once again become a "Trump concept stock". In the short term, the factor that determines the price trend of cryptocurrencies will not be the president's speech, but Trump's poll numbers.
B. On October 16, Kamala Harris once again approached the cryptocurrency industry and promised to implement rights protection
Democratic candidate Kamala Harris added new policy guidelines for the crypto industry to her latest public campaign website yesterday, promising to support digital asset policies that protect cryptocurrency investors, but her promise is to "support black people" because their survey found that about 20% of black Americans own or have held cryptocurrencies, and these new technologies provide them with more ways to access banking and financial services, improving the financial services they were unable to enjoy in the past.
However, the page does not provide specific details of the regulatory framework, and Harris did not mention key words in the crypto industry, such as "blockchain" or "digital assets," in her last speech in Pennsylvania. This has caused a lot of criticism in the crypto community, and some have questioned Harris's promises, believing that her policies are "race-based" and lack concrete actions.
It is a good thing that candidates from both parties are gradually moving closer to the crypto industry. Currently, Trump's winning rate in the prediction market continues to rise, driving the price of Bitcoin to continue to rise. However, Bitcoin experienced a sharp drop and rise yesterday. We believe that this is related to the settlement of derivatives. It then rebounded to US$67,000. The price trend is expected to decouple from the general economy. For traders, the US election may be a more important indicator.
C. On October 18, Bitcoin spot ETF saw continuous net inflows, pushing the price up to $67,000
Bitcoin prices have risen nearly 11% over the past week, currently trading above $67,000. This price increase coincides with an increase in inflows into U.S. Bitcoin spot ETFs. The total assets under management (AUM) of all U.S. spot Bitcoin ETFs has reached $64.46 billion, a four-month high, and Bitcoin spot ETFs saw $460 million in inflows on Thursday, with BlackRock's IBIT being the largest net inflow fund at $390 million.
According to SoSoValue data, this is the largest inflow of funds since July 22, when IBIT had a net inflow of US$530 million. Overall, the Bitcoin spot ETF market shows a growth trend. In addition to IBIT, Fidelity's FBTC had a net inflow of US$14.81 million, Bitwise's BITB had a net inflow of US$12.93 million, and other similar Bitcoin ETFs also showed net inflows.
This shows that investors are more interested in Bitcoin, especially as the US presidential election approaches. Republican candidate Trump is seen as a supporter of cryptocurrencies, and the expectation of his victory has driven market optimism. Bitcoin "whale" transfer activities have also surged, with discussions about Bitcoin on social media accounting for more than a quarter, and trading sentiment is very hot before the election.
The US presidential election has pushed up gold prices and Bitcoin prices, and the short-term outlook remains positive
In addition to the geopolitical conflicts in the Middle East and the interest rate cut cycle, the "US election" is also the main reason for the rise in gold prices and Bitcoin. The increased probability of Trump's victory is of course the main reason, but there is another reason. Neither Republican Trump nor Democratic Kamala Harris mentioned fiscal spending cuts in their campaign policies. Instead, there will be more policies to stimulate the economy, which means that the proportion of US fiscal debt to GDP will only increase. The direction of dollar easing is a path of no return as the government spends money lavishly.
It is worth noting that in order to raise funds to maintain the heat of the US economy, the United States has recently frequently and massively auctioned government bonds to raise funds from the market, which has also made it difficult for market funds to digest. As a result, bonds are currently in a situation of oversupply, and the transaction prices of new bonds are getting lower and lower, which has also caused long-term yields on US Treasury bonds to rise. All of these reflect that market investors' confidence in the US dollar is declining. At this time, gold and Bitcoin have become excellent safe havens for funds.
UBS' latest report points out that as the US and global central banks adopt monetary easing policies, the cost of holding gold will decrease, which will attract more investors to allocate gold. In addition, factors such as geopolitical tensions, the US presidential election and rising government fiscal deficits have further increased the demand for gold as a safe-haven asset.
At the same time, in response to sanctions risks and geopolitical instability, central banks around the world have increased their gold reserves to diversify their assets. Coupled with the steady demand for physical gold from consumers, UBS expects the price of gold to reach $2,800 per ounce by the end of 2024 and further climb to $3,000 per ounce in 2025. We believe this also applies to Bitcoin, a "digital gold asset."
Taking all the above into consideration, the U.S. interest rate cut cycle, geopolitical conflicts, the increased chances of Trump's victory, U.S. fiscal spending and the decline in confidence in the U.S. dollar have all led to a series of increases in the prices of gold and Bitcoin. Among them, the price characteristics of Bitcoin are more advantageous because it is more closely related to Trump's victory. As long as new polls show that Trump is leading in the polls, the price of Bitcoin is likely to rise even more.
The current price of Bitcoin is above $68,000, which is not far from the reasonable price of $70,000 that we called out in the first half of the year. We are optimistic that Bitcoin will see a greater increase under this wave of "Trump trading" themes, and may even exceed our original reasonable price. As the possibility of Trump's victory increases, Bitcoin may see more irrational price chasing in the short term. Investors can be patient and wait and see. Before the November election, the trend of Bitcoin is favorable and it is expected to go further.
