Source: HashKey, first published on FT Chinese, authorized reprint
It has been less than a month since the interest rate cut, and the global capital market has already experienced several large-scale capital flows - the technology sector of the US stock market led the rebound, driving the Nasdaq index to rise, and the S&P 500 index and Dow Jones index hit new highs. The A-share and Hong Kong stock markets also experienced a strong upward trend before the National Day. This week, capital has returned to the Nasdaq and cryptocurrency markets, driving the prices of Bitcoin-related assets to rise and break through $68,000, and it is expected to soon break new highs.
Capital is switching rapidly between different tracks, forming a "seesaw" effect. Currently, global liquidity is about to emerge. How to analyze the market pattern? How will the crypto assets perform?
Bitcoin challenges historical price highs
This week, the cryptocurrency market has performed impressively, with Bitcoin continuing to rise and approaching the $68,000 mark. I personally expect that it will soon challenge the resistance level of $70,000 to $72,000 and break the historical high.
The current timing of the market's rise may be closely related to the upcoming US election. As November 4th, the election day, approaches, the stability of the financial market becomes particularly important - before the election, the stability and prosperity of the market play a key role in the Democratic Party's election prospects, so maintaining a stable market operation is of paramount importance; after the election, regardless of who takes office in the White House, stabilizing and stimulating the financial market will become an important agenda for the new government.
At the same time, looking globally, the current geopolitical tensions in Northeast Asia have led to a more cautious attitude of international capital towards the Asian market, and the "eastward flow" has slowed down significantly. Against this backdrop, the outcome of the US election will reshape the international geopolitical landscape. The foreign policy orientation of the new government - whether it is the attitude towards the Russia-Ukraine conflict or the response to the situation in the Middle East - may trigger a chain reaction. Changes in these geopolitical factors will affect global risk aversion sentiment and capital flows, causing the financial market to face significant adjustments in the period after the election.
In addition to political factors, the cryptocurrency market itself is also sending signals worthy of attention. First, the breakthrough in the stock price of MicroStrategy (MSTR). As the largest publicly traded corporate holder of Bitcoin, the stock value of MicroStrategy reflects not only the company's own valuation, but also the market's expectations for the future price of Bitcoin. The MSTR stock price has risen by about 50% in the past month, which can be seen as a reflection of institutional investors' optimistic attitude towards crypto assets.
Secondly, Bitcoin has completed the necessary consolidation. Over the past six months or so, Bitcoin has experienced a prolonged sideways consolidation, during which it has successfully digested the selling pressure from countries such as Germany and the US, mainly from the approval of Bitcoin spot ETFs and various institutional liquidations. After the market has fully digested these sell-offs, the timing for Bitcoin's turnaround is ripe.
Furthermore, Ethereum is currently showing good investment value. In the market adjustment over the past six months, Ethereum has seen a larger decline relative to Bitcoin, creating a significant price gap. Based on historical experience, this gap is often repaired in the subsequent market trend, which also makes Ethereum attractive to capital at the current price level.
Global liquidity is about to emerge, and the crypto market has great potential
In addition, there is an interesting phenomenon between the traditional capital market and the crypto market - when the traditional capital market is performing strongly, the crypto market is relatively sluggish; while when the prices of crypto assets rise sharply, some traditional capital markets perform weakly, forming a special "seesaw" effect. This "seesaw" effect reveals the law of global capital flow - capital is always chasing the most speculative market opportunities. In the context of intensified global competition, constantly changing policies, and the emergence of new asset classes, capital is accelerating its flow to the areas that can bring the highest returns.
Although we are now seeing the liquidity "jumping around" in a strange way, from a long-term perspective, global capital's liquidity will inevitably be massively injected into the crypto market, and the turning point is about to arrive.
First, from the underlying logic of economics, the rise of the crypto market is due to the free flow of capital and the greatly improved efficiency. The traditional financial market is constrained by various regulations and intermediary institutions, resulting in limited global capital mobility. The crypto market, through blockchain technology, has realized the free flow of funds globally, reducing the friction costs in capital flows.
By reducing intermediaries, improving transparency, and enhancing the efficiency of financial services, the crypto market can adapt to market changes and respond to the needs of global investors more quickly. This improvement in liquidity and efficiency will have a greater impact on the global economy and drive capital allocation towards a more optimized and rational direction. At the same time, as crypto technology continues to be widely applied, it can realize even grander scenarios in the future. With the continuous development of RWA and DePIN, it can drive the innovation of the traditional economy, which is an important driving force for the future development of the crypto market.
At the same time, the emergence of the "seesaw effect" means that in the industry development over the past two years, crypto assets have become a mainstream choice for the capital market, alongside traditional assets. The crypto market has such great potential, and one of the important reasons why it has not attracted large-scale capital in the past is the lack of a compliant path. Now, with the US launching a Bitcoin spot ETF, establishing a cryptocurrency regulatory framework, and supporting the development of Web3, it has opened up a compliant path for the development of the crypto market.
Today, the "seesaw" of global liquidity is gradually tilting towards Hong Kong.
Starting from 2023, Hong Kong will implement a new cryptocurrency regulatory framework, allowing retail investors to legally participate in crypto asset trading through licensed exchanges. At that time, HashKey Exchange became the first licensed exchange to provide trading services for retail investors. Now, HashKey Exchange's total trading volume has exceeded HK$538 billion, with user assets exceeding HK$50 billion. As of October 16, according to the latest data from Coingecko, HashKey Exchange ranks among the top 8 exchanges globally and is the highest-ranked licensed virtual asset trading exchange in Hong Kong.
Hong Kong not only provides existing policy guarantees, but also has the dual advantages of innovation and technological development, which can effectively attract global liquidity capital inflows. For investors, this combination means they can safely enter a highly innovative market while enjoying strong legal and policy protection. Through this two-way liquidity bridge, Hong Kong can continue to consolidate its position as a global financial hub, while utilizing Web3 to develop new sources of liquidity, further enhancing its importance in the international capital market.
In this era of globalized liquidity and capital allocation, the crypto market, with its unique advantages and innovative potential, is becoming a new battlefield in the global capital competition. With the continuous progress of technology and the gradual improvement of regulation, the crypto market is expected to usher in a broader development space and become an indispensable force in global capital allocation.
