Nov 1, 2023

Bitcoin (BTC) gained roughly 28% in October, its strongest showing since January.

Video transcript

Bitcoin gained roughly 28% in October. Its strongest showing since January as the crypto rally widened. Joining us now to discuss this coin desk indices. Head of research, Todd Groth, welcome back, Todd October. Indeed for Bitcoin historically, it's been a very seasonally positive month for for the crypto assets, Bitcoin up 28 Ethereum up eight broad CM I coin desk market index of about 21. So it was really out performance of a Bitcoin um underperformance on a relative basis of Ethereum, but pretty broad gains indeed across the market. Let's take a look at some of the sectors we break down this coin desk coin desk breaks down into roughly six sectors. Here. Talk about that. Uh Yeah, so uh on a relative basis, uh again, had uh uh Bitcoin and with that, it's in the currency sector uh that uh that was the outperformer as well as the computing. That was I apologize. Uh Bitcoin is the largest component of that currency sector. Correct? Exactly. So these sectors are market cap weighted and because of the market capitalization of Bitcoin relative to others in the currency sector, it really has a large impact on that sector which, which, which drove it to be the relative performance gainer of across the sectors. Computing was up 23 as well. The biggest component there is chain link which was also up 41 on the on the month as well. Where is that on currencies or computing? Uh No, that's a smart contract platform that was a relative under performer only up nine and then D five D five sector as well was up one digitization slightly slightly negative down to really almost all sectors positive for the month. So if you think about it broadly, the gains were shared across the whole space but definitely currency and computing holding larger gains due to the presence of Bitcoin and chain link within computing, correct me if I'm wrong. But I think this is one of the first times in a while that we've seen so much green when we look at these sectors, how does this compare to previous months? Uh Yeah, it's, it's uh the correlations across across tokens have uh have have have tightened a bit. So really we're having much more trading like the like a whole sector up and down. And that's, that's partially because of Bitcoin. Bitcoin being the largest. If you look at from market cap weighted lens, it's going to contribute more. But it's also it's a bit of the gravity of the whole market as what we see across the cycle. Generally. Bitcoin leads tokens upwards through a cycle, then once you get to closer to the peak of the cycle, then you have investors make some side bets away from Bitcoin into the alt coin season as it's referred to. So it's just seeing that the strong upward upside correlation Bitcoin sort of dragging up the space currently. 11 alt coin Solana, formerly known as Sam's coin. Yeah, I mean, it's not, it was never actually the name, of course, but that was definitely the nickname. Uh It, it's, it's been rallying for a while now. Not just in October September 2. I there have been some times here where uh we, we're, we're seeing kind of AAA resurrection of Solana even though it's far down from where it was at its peak. So can you explain what's going on here? Is it a dead cat bounce or what's the excitement now around Solana? If there is any real excitement? Yeah, it's, it's, it's just been, it's a combination of sentiment getting better because sentiment was so bad earlier. It started last year, for instance, with the F TX collapse last fall. I can't believe it's been a year now. So initially it was, oh, here's, here's some of FX tokens, here's a Sams Token. It, it's going to be an orphaned project that no one will build on. Well, in January, February, we saw a fairly big rebound as people were selling off at the end of the year to harvest some of those losses. And then, so you had sort of a reversal initially. And then over time, it's the network, the community is still building, it is still growing. And I think the combination of showing that there is underlying support, the community is still thriving. It's not what it used to be, but it is, it continues to build. And II, I almost think that this, what happened in October was with the FTX trial, there was a bit of a, as a risk premium, you know, sort of like what, you know, what, what if there was something that was disclosed during the, during the process that might have a negative impact on the token? I think as we've kind of gotten to near the end of the trial, investors are realizing that that sort of the F TX SBF Association with Salon is a bit of a thing of the past and, and with that, they are still holding developer conferences, people are still building on it and it doesn't seem to be going away. It's almost, it's almost better now because in itself being an orphan project, it doesn't have an association anymore going forward. So I think that's actually to the benefit of the community. If we zoom out now, how would you characterize the broader macroeconomic environment? Sure. Yeah, it's challenging out there in the equity market was down for the month, both the S and P the tech heavy NASDAQ bonds down too. Uh You know, I just searched this morning. I like to, I like to look at what a balanced equity bond portfolio would do since a lot of investors, most investors, if you don't, if you don't configure your 401 by default, you're put into a balanced stock bond fund. That's been down 2% this month, down 7% over the last three months. It's this idea of this traditional stock bond portfolio mix. It's a bit broken now with rising yields with valuations fairly high across the equity market. So investors are looking for what, what real assets can I can I can I put my money into gold for the month. Gold was up nine. So you know, Bitcoin, Bitcoin up multiples of that, but both in a similar direction. Um also positive that Bitcoin is decoupling from both equities and interest rates. I know earlier earlier this year when we saw interest rates rise be, oh no, that's going to be bad for Bitcoin or are the dollars rising? That's bad for Bitcoin. It seems like now we coupled from both equities and equity risk sentiment as well as interest rates. So that's a very positive development as well. Is that long term though, I mean, is it or is this, has this been a short term change in in correlation for at least uh due to other factors that might not necessarily be interest rate related? And at the end of the day, crypto remains particularly Bitcoin. The market cap of Bitcoin is smaller than many companies on the S and P 500. So, are there other factors involved in how people invest in crypto that might not be macro related that might be very specific to moving money around, for instance, has been charged? And um I is this is sort of trying to read too much into the risk uh into whether or not the risk is no longer the, the story with crypto. That, that, that's a great question. You know, we, we are all, all the price sectors has been on fairly low volume. I think what we really tell as whether or not we've decoupled is if, you know, unfortunately, if we have a big risk off event, where will the, where will that knee jerk response go of investors? Where will they flee to? Will it be crypto? It could be the volatility of crypto has decreased again, similar similar to the off of low volume. So you take that with a grain of salt. Um But yeah, I think that's, that's, that's a great question. I think with the, with the, with the Israeli Gaza conflict that was showing a bit of event risk, which was positive for gold and Bitcoin did rally sort of during that and after that on that. But it's also, it's also been clouded with the, with the, uh with the spot ETF the, the, the march towards the spot ETF also more, more shoutouts from large investors in TRD, Larry Fink, Mohammed El Arian was even saying Bitcoin is an alternative to bonds. Stanley Druckenmiller also, I don't own Bitcoin, but I should. Um so he, he said that and, and I look at that and I'm like, well, OK, as an investor, you, you, you try to remove your bias of previous uh returns because you have to kind of always look forward into what the investment will bring in the future. So for him to say that and not act, what would the Stanley but in all seriousness, what would, what would stop him from looking forward and saying there's too much risk on the table and, and, and I think the other thing too, as you mentioned, some of the the factors there are major players that you just mentioned, Iran and Russia, notably uh players in, in crypto, whether whether we like to admit it or not that are involved at least on some level with uh uh with the price of, of things such as Bitcoin is that, do, do you think that that's kind of a thought that some investors have uh kind of ghoulishly if you will, that these players will, will act in Bitcoin? Oh A as as in because some state actors that are, are have less than stellar reputations are also in Bitcoin. They don't want to be associated as investors, they do want to be associated because you know, people are degenerates. Um um, and that's a badge of honor and crypto. Uh But, but it's this idea that, you know what if these, if these guys are going to, if they're going to try to fund some of their uh war using Bitcoin, let's jump in on that train. Oh, yeah. Well, I mean, it, it does bring up because Bitcoin gold, there are only a few ways to kind of invest in non sovereign and non sovereign denominated assets. So in, in that sense, it is a bit of a of an escape valve from, from what continues to be kind of increasing debt and debt interest rate burdens in the developed economies. Yeah, it is, it is back to your comment. It is interesting that, you know, someone like Dr and Miller who I it it's, you know, I would put pass to easily be able to invest in Bitcoin, but just sort of that passing comment I should is interesting. Um But yeah, I think as unfortunately, uh if, if political strife increases more uncertainty increases, it's going to be viewed as a, as a, as a a fungible global hedge is to to at least have some in crypto. We've seen that in Argentina Turkey, any, any sort of country with a weak, weaker currency has is having greater Bitcoin adoption. So it is in some sense that sort of that passport, international passport of value as gold is. But you know, if it's gold physical. Well, you got to lug those bars around. So it makes a little less than ideal of moving money across borders, Todd. We just saw the Bitcoin trend indicator. While you were speaking, we also have the ether trend indicator to throw up on the screen, talk about, talk to us about what we are seeing here. So most most of October, we saw a strong positive indication from Bitcoin trends and that's just on the back of the strong price action of the asset. Well, we had a bit of a neutral, initially, initially negative, a slight negative, neutral. Now it's a slight positive on Ether. So it's interesting that we are seeing that Bitcoin kind of run away from Ethereum over the last few weeks. Now both have positive trends, albeit Bitcoin has a stronger trend currently. So it would be interesting to see that sort of that bit e spread to see if we, if we come back to kind of more more average average levels. Um kind of with that Bitcoin dominance is now even even higher than it was over the summer. We're now 40 54% in October in the previous high over the last two years was 52 in June. So increased, increased enthusiasm on a relative basis for Bitcoin. And I think really, it's on the back of much more, much more, much more shout outs across, across the traditional financial markets and that enthusiasm for this body

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