Author: BitPush
The correlation between US stocks and Bitcoin has always been relatively high, so why have 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 "The Bit Coin Mystery", but 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 Bitcoin's rise in October, and the overall situation should still be approached with caution.
Bitcoin and US stocks diverge again, and the cooling of the A-share market may help capital flow back
The correlation between Bitcoin and US stocks has always been relatively high, but they have diverged again in the past two days. In the early morning of Beijing time on the 10th, US stocks closed higher on Wednesday, with the Dow Jones and S&P 500 indices both hitting new highs. Against the backdrop of new highs in US stocks, Bitcoin has continued to decline. What is the reason behind this?
The global financial market is like a pool of water, where the money-making effect is, that is where the capital will gather. There are obvious signs of capital fleeing the crypto market to the A-share market. Recently, the hot wave of making money and getting rich in the A-share market has swept the world. On October 8, the trading volume of the Shanghai and Shenzhen markets reached a record high of 3.45 trillion yuan, an increase of more than 800 billion yuan compared to September 30. Almost all sectors rose, with securities and semiconductors collectively exploding. Individual stocks continued to rise, with 5,029 stocks rising, 791 stocks hitting the daily limit, and 291 stocks falling. More unusually, 100 broad-based ETFs rose to the daily limit on the same day, and the ETF market saw a surge in trading. The latest weekly data released by the global capital flow monitoring agency EPFR shows that in the week ended October 2, the emerging market stock funds tracked by EPFR recorded the second largest weekly inflow of the year, marking the 18th consecutive week of net inflow, and almost all of this inflow went to the Chinese market. David Scutt, a senior strategist at Jasin Group in the US, told reporters that the direction of capital flow is always the most critical factor, and global investors are still relatively light on Chinese stocks. Citing data from Goldman Sachs channels, he said that while hedge funds have quickly increased their exposure to the Chinese market recently, it is still at the 55th percentile of the five-year range, compared to the 91st percentile in January 2023. This also means that a dramatic change in the market could lead to further increases in foreign capital's allocation to the Chinese stock market.
In addition to the sustained large inflows of capital, China has also continued to introduce positive policies, and 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, on September 24, the China Securities Regulatory Commission issued the "Opinions on Deepening the Reform of the Mergers and Acquisitions Market for Listed Companies" to further stimulate the vitality of the mergers and acquisitions market and support listed companies to inject high-quality assets to enhance their investment value; the "Regulatory Guidelines for Listed Companies No. 10 - Market Value Management (Draft for Comments)" was released for public comment, requiring listed companies to improve the quality of listed companies as the basis and promote the enhancement of the investment value of listed companies. In addition, on September 26, the Central Financial Office and the China Securities Regulatory Commission jointly issued the "Guidance on Promoting the Entry of Medium and Long-term Funds into the Market" to unblock the bottlenecks for social security, insurance, wealth management and other funds to enter the market, and strive to boost the capital market.
The A-share market is currently the investment depression of the global financial market, and there are obvious signs of capital inflows, which has also led to a clear sign of capital fleeing the crypto market. This is specifically reflected in the continuous negative premium of USDT and the outflow of capital from Bitcoin ETFs. However, with the recent frenzy in the A-share market, the market has seen a correction, and it is expected that the A-share market will need to go through a period of adjustment, and the outflow of capital from the crypto market is expected to slow down. However, considering that the current valuation of the A-share market is relatively low, the capital may further flee from the crypto market or reduce investment in crypto assets, which is undoubtedly not conducive to the rise of Bitcoin.
Potential US government selling pressure may put pressure on Bitcoin
Since June this year, the major sell-off wave that Bitcoin has faced has come from the combined selling pressure from the German government, the US government, and the Mt. Gox compensation. Recently, the potential selling pressure from the US government may also become a factor in Bitcoin's setback. According to a post by Lookonchain, the US government appears to be able to freely sell the 69,370 Bitcoins seized from Silk Road, as the US Supreme Court refused to hear the Battle Born Investments case regarding the ownership of the 69,370 BTC (about $433 million) seized from Silk Road on October 7, allowing the government to fully control the seized funds.
The author believes that the Biden administration may not be very friendly to the crypto market, and the US government may potentially conduct a sell-off. The last time the US government sold was two months ago, when it moved 29,800 BTC (about $202 million), with 10,000 BTC (about $59.4 million) transferred to Coinbase Prime. The market is also expressing concerns about the crypto prospects after the victory of Democratic Vice President Kamala Harris. Bernstein analysts said that if Kamala Harris wins, Bitcoin may test the $40,000 range again.
In addition to the potential selling pressure from the US government, the new HBO documentary "The Bit Coin Mystery" may also have caused some market panic, becoming the main reason for Bitcoin's decline on October 9. This new HBO film, directed by the famous director Cullen Hoback known for solving mysteries, mainly tries to reveal the identity of Satoshi Nakamoto. This has attracted widespread market attention. Currently, the Bitcoin held by Satoshi Nakamoto is worth $68 billion, which is an extremely large number. For the market, if the identity of this person is indeed confirmed as the founder of Bitcoin, it would certainly be an exciting event, but it may not be so for the market performance.
The controversy over the HBO documentary is huge. Cullen Hoback believes that Peter Todd is the evidence that he is Satoshi Nakamoto, but many professionals in the crypto market do not agree. Some professionals point out that HBO made mistakes in the timeline of Peter Todd in the entire documentary, and mistakenly thought he was Satoshi Nakamoto, in fact, in 2008 Peter Todd was not even 16 years old, which is very inconsistent with his age, and his biography and experience are also very different from what we know about Satoshi Nakamoto. Moreover, Todd has long served as an advisor to multiple projects, and if he were really Satoshi Nakamoto, his Bitcoin wallet would not have remained completely untouched for so many years. Peter Todd himself is also very dissatisfied and has publicly denied that he is Satoshi Nakamoto, repeatedly stating on social media that Hoback's theory is completely absurd.
Golden September and Silver October? Bitcoin still needs technical drivers
Although Bitcoin has performed weakly recently, the market remains optimistic about its future performance, in addition to the Fed's interest rate cuts, the main support is the growth of USDT's market capitalization.
CryptoQuant's data shows that the liquidity of stablecoins continued to grow to a record $169 billion at the end of September, up 31% year-to-date (YTD). The dominant one is still Tether's USDT, whose market value has increased by $28 billion to nearly $120 billion, accounting for 71% of the market share; and Circle's USDC, whose market value has increased by $11 billion to $36 billion, up 44% YTD, accounting for 21% of the market share. The record number of US dollar stablecoins and the surge in large Bitcoin transactions may lay the foundation for a broader rise in BTC in the coming weeks, keeping the asset's bullish seasonality intact for October.
The author believes that the bullish expectations for the A-share market are currently very obvious, and the global financial market has been continuously hyping up the expectations for the A-share market, which will essentially lead to the outflow of funds from the cryptocurrency market or a decrease in investment. In addition, the outcome of the US election will be a very important factor. If Trump is elected, due to his active embrace of cryptocurrencies, this will undoubtedly be a direct stimulus for BTC; but if Harris is elected, the result for BTC will be difficult to say, and a further deep correction cannot be ruled out, which will be until November. Overall, the author holds a cautious attitude towards the BTC market performance in October. From a longer-term perspective, the cryptocurrency market still needs to be driven by technology, and simple financial stimulus is unlikely to form a sustained prosperity.
