Background
Bitcoin broke through the $67,000 mark on October 15, rising about 10% for three consecutive days. This price breakthrough took 76 days, finally breaking out of the $49,000 - $66,500 range, which is also seen as a signal of the return of the bull market.
In terms of market sentiment, the Fear and Greed Index has also risen to 71, which is in the greed zone. However, the market sentiment recovery is limited to Bitcoin, and Altcoins other than Bitcoin have not kept up with the gains, which can be seen from observing the BTC.D (Bitcoin market capitalization ratio).
Currently, BTC.D is as high as 58.77%, and it can be seen from the chart below that Bitcoin's market share is at a new high for this cycle, and is also the highest point in the past three and a half years since April 2021.
Altcoins are weak, is the real bull market about to begin?
WOO X Research believes that this is a prelude to the outbreak of the bull market: the big players are buying a large amount of Bitcoin, thereby pushing up the price and sucking the blood of Altcoins, and when the Bitcoin price has risen to a certain extent, the funds will flow out of Bitcoin and pull up other Altcoins, and the Altcoin season will officially begin.
However, the prerequisite for launching the Altcoin season is the rise in the price of Bitcoin, so what positive factors can help Bitcoin continue to rise in Q4 2024?
Interest Rate Cuts
As the leader of the cryptocurrency market, Bitcoin, as part of the asset class, relies on the influx of off-market funds for its price growth, so interest rate cuts are one of the key factors driving the rise in Bitcoin prices.
Interest rate cuts mean that the US is releasing more liquidity into the risk market, which theoretically will lead to a rise in the stock market and other asset classes such as foreign currencies, and Bitcoin, which has the highest risk level and relatively small market capitalization, can also benefit from this.
Currently, the Fed has cut rates by 50 BP in September, which also marks the beginning of the Fed's rate cut cycle. According to the Fed Watch, the probability of the interest rate falling between 450-475 BP in November is 92%, which has already confirmed that we are in the early stage of the rate cut cycle.
However, the transmission of liquidity often takes time, and Q4 2024 is the opportunity for the cryptocurrency market to absorb the spillover liquidity.
ETF Incremental Funds
The BTC ETF was approved in January this year, which is also seen as the traditional financial sector's recognition of Bitcoin as an asset class, and the steady stream of traditional institutional buy orders is also seen as one of the main narratives for the rise.
Looking at the data performance, the total assets of BTC ETFs have reached a historical high of $64.4 billion, and the cumulative net inflow has also reached $20 billion.
The selling pressure from the Grayscale GBTC, which everyone is most concerned about, has also clearly decreased recently, and there are even signs of net inflows.
In terms of trading volume, it has also been steadily growing, reaching a cumulative total of $440 billion.
In summary, the BTC ETF data shows a very healthy trend, and investors have not lost interest in Bitcoin over time. BTC ETFs continue to attract external funds, and the current Bitcoin price has not yet reached its peak, indicating that there is still ample room for upside.
Continued Growth of Stablecoins
The issuance of stablecoins is not diluted in value like other tokens, because the collateral behind them allows them to be pegged to one US dollar, which represents the increasing demand for stablecoins in the cryptocurrency market, and is also theoretically seen as a bullish signal of hot money flowing into the market.
The market capitalization of stablecoins has been steadily growing since the beginning of this year, from $130 billion to $172.8 billion, with a year-to-date increase of 32%, and it can be expected that they will continue to be issued in the future.
Among them, USDT accounts for nearly 70% of the market share, with a market value growth of $28 billion since 2024, indicating the crazy pace of money printing.
Looking back on past experience, the correlation between the market capitalization of stablecoins and the price of Bitcoin is as follows:
- In 2021, as Bitcoin prices rose, the market capitalization of stablecoins also increased, indicating that funds were flowing into the cryptocurrency market, and investors may have temporarily parked their funds in stablecoins, waiting for opportunities to buy Bitcoin or other cryptocurrencies.
- In 2022, as the market declined, both Bitcoin prices and the market capitalization of stablecoins declined, indicating that funds were withdrawing from the market, with investors exchanging stablecoins for fiat currency or directly withdrawing funds.
- From 2023 to 2024, both Bitcoin prices and the market capitalization of stablecoins have shown a gradual upward trend, suggesting that the market is regaining interest and funds are flowing back into the cryptocurrency market.
There is a strong positive correlation between Bitcoin prices and the market capitalization of stablecoins. When Bitcoin prices rise, the market capitalization of stablecoins usually increases, indicating that market funds are flowing in; conversely, when Bitcoin prices fall, the market capitalization of stablecoins also decreases, indicating that market funds are flowing out.
