Bitcoin Ignites Crypto Rally, BTC ETF Inflows Climb, CoinDesk Acquires CCData

• Bitcoin ETFs see over $1.5 billion in cumulative daily net inflows this past week
• Coinbase reports stable bitcoin liquidity despite the SEC's lawsuit against Cumberland
• CoinDesk announces the strategic acquisition of CCData and CryptoCompare

Bitcoin leads crypto rally, bitcoin ETF inflows mirror price action

Crypto markets surged this week led by bitcoin, with the total market cap surpassing $2.3 trillion and bitcoin dominance holding steady at around 57%. Among the blue chips, bitcoin rallied by 11.6% compared to the previous week while ether posted a weekly gain of 10.3%. The newly listed spot-only ether ETF continued to experience modest inflows, while the spot-only bitcoin ETF saw a strong $1.55 billion in cumulative net inflows over the past five trading days.

The BTC open interest weighted perpetual futures funding rate jumped to over 0.0136% earlier this week, marking its highest level since July 27. This spike suggests that the recent positive price movement was driven not only by spot buying, but also by a rise in leveraged long positions in the futures market. On Polymarket, bettors now estimate a 63% chance that BTC will reach $70,000 in October, a significant increase of 45 percentage points in just one week. Additionally, they project a 70% likelihood that BTC will achieve a new all-time high in 2024, up over 20 percentage points compared to the previous week. 

Donald Trump's odds of winning the US presidential election have surged to more than a two-month high on the Polymarket. Trump's prospects have increased to levels last observed after President Joe Biden declared he would not run for reelection, setting the stage for his vice president to take over. Meanwhile, Kalshi, which has recently gained approval to list contracts related to the US elections, indicates that Trump is ahead of Harris, with a margin of 56% to 44%.

DOGE outperformed bitcoin with a notable 16.5% rally this week, with most of the price action occurring on Wednesday, likely fueled by social chatter on X and speculation of a bigger Elon Musk endorsement in the future. Interest in DOGE surged among prominent X accounts after filings revealed Musk had donated $75 million to a political action committee (PAC) supporting Trump’s campaign. This PAC has been driving much of the ground game in key states ahead of the November presidential election. On various talk shows, Musk has floated the idea of creating a "Department of Government Efficiency," or D.O.G.E., aimed at improving government spending. Trump has hinted that, if re-elected, he would appoint Musk to lead a “government efficiency commission,” according to the BBC. Traders are likely positioning with the hypothesis that a Trump victory could reignite “DOGE” chatter, driving up retail interest in Dogecoin.

Private markets remain active, but election uncertainty looms ahead

In a recent report by crypto data analysis firm Kaiko, it was noted that the depth of buy and sell orders on Coinbase within 2% of the mid-price began to decline on October 10 at 18:00 UTC, dropping by 46% to 267 BTC within a few hours. This drop indicates that an order size 46% lower than previous sizes could now move the spot price by 2% in either direction. 

The 2% market depth serves as a key indicator of market liquidity, reflecting the market's ability to accommodate large trades with minimal slippage. While the depth of sell orders decreased, the depth of buy orders increased, suggesting that market makers were adjusting their positions in anticipation of a potential price decline.

In response to Kaiko's findings, a Coinbase spokesperson stated to CoinDesk that there had not been a substantial change in BTC-USD depth throughout October. This statement aimed to address concerns about falling liquidity in the bitcoin order book after the SEC charged Cumberland on October 10 for operating as an unregistered dealer with over $2 billion in crypto assets since March 2018. Coinbase expressed confidence that trading conditions on the platform remain stable, aiming to reassure users amid ongoing regulatory scrutiny.

Crypto private markets remain active, highlighted by Blockstream's recent closure of a $210 million convertible note financing round led by Fulgur Ventures. This funding will accelerate the adoption and development of Blockstream's layer-2 technologies, expand its mining operations, and increase its bitcoin treasury. Blockstream's layer-2 solutions, including the Liquid and Lightning networks, aim to alleviate scaling and data bottlenecks. In another notable development, CoinDesk has acquired crypto data provider CCData and its retail arm, CryptoCompare, which serves over 300,000 active users. CCData is recognized as a UK-regulated benchmark administrator and a key provider of digital asset data and index solutions.

With less than three weeks until the US presidential election, traders are positioning themselves for the aftermath of November 5 and how a new administration may respond to factors impacting financial markets, including crypto. 

The recent uptrend in cryptocurrencies can be attributed to factors such as the Chinese stimulus measures, anticipated rate cuts from Western central banks, and the approaching elections. While crypto was still in its infancy prior to the 2020 election, it has gained traction, and the second half of October typically marks the beginning of a bullish phase for financial assets like stocks. 

Historical data from Coinglass indicates that bitcoin usually generates returns in the latter half of October that are double that of the first half, suggesting a seasonal trend. However, the uncertainty of the upcoming elections could introduce volatility, leading to price action in either direction. Looking ahead to the US election, the options market indicates a positive sentiment toward bitcoin, with a large share of call open interest focused on the $70,000 and $80,000 strike prices for the upcoming expiration on November 29.

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Macro pulse 

US equities rose 0.9% this week, with utilities, real estate, and financials leading the way, bolstered by strong earnings from Morgan Stanley. Oil futures dropped 3.9%, as much of the geopolitical risk premium faded early in the week after reports suggested Israel was unlikely to target Iran’s nuclear sites or oil infrastructure in retaliation. Meanwhile, the US Dollar index gained 0.6%, 10-year US Treasury yields dipped by 5 bps, and the Gold & Silver index surged 4.9% over the week.

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^{*Note: Weekly (7 calendar day) performance figures are as of 8am SGT on October 17, 2024} 

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