Bitcoin Breaks Out – Cryptoasset Weekly Update (October 19, 2024)

BTC/USD & ETH/USD Key Points

• Flows into exchange-based cryptoasset investment vehicles have gone vertical over the last week, with spot Bitcoin ETFs attracting more than $2B in inflows over just 5 days.
• 2024 Presidential polls and betting markets have shifted slightly toward favoring Donald Trump, the ostensibly more “pro-crypto” candidate
• There’s no denying that the technical outlook on Bitcoin is more bullish than it’s been in weeks if not months

Cryptoasset Market News

• Stablecoin Tether is exploring USD lending to commodities traders.
• Spot Bitcoin ETFs attract more than $2B in inflows over the last 5 days (more below).
• Ethereum creator Vitalik Buterin proposed changes to Ethereum including lowering the staking threshold from 32 ETH to 1 ETH and changing single-slot finality to a single 12-second slot from its existing 15-minute time frame.
• Bitcoin open interest on the CME hit an all-time high above $12B.
• Tesla transferred 11,509 BTC ($765M) to 7 new wallets after 2 years of dormancy.
• The Trump team sold just $12M worth of $WLFI tokens on the first day of pre-sale as the website crashed. This is merely 4% of their $300M goal.

Macroeconomic Backdrop

It was a quieter week for global macroeconomic developments, highlighted by the European Central Bank’s widely-telegraphed 25bps interest rate cut on Thursday. In her comments, ECB President Christine Lagarde emphasized the central bank’s focus on the “output gap,” essentially indicating a renewed focus on growth that has some traders speculating that the ECB will continue to cut interest rates from here.

In the US, a strong retail sales report gave all risk assets a boost, even if it ultimately means that the Federal Reserve may not cut interest rates as aggressively in the coming year. Ultimately, Bitcoin still trades primarily as a risk asset, so strong growth in the underlying economy is a bullish factor for the cryptocurrency.

Finally, the 2024 Presidential polls and betting markets have shifted slightly toward favoring Donald Trump, the ostensibly more “pro-crypto” candidate. Combined with projections for a larger budget deficit under Trump (the nonpartisan Committee for a Responsible Federal Budget projects a $7.5T growth in the national debt over the next decade if Trump wins the election vs. “only” $3.5T under Kamala Harris), a Trump victory would be seen as a decided bullish for Bitcoin and the broader cryptoasset markets.

Sentiment and Flows

The sentiment gauge we watch most closely, the “Crypto Fear and Greed Index,” rose to 73 last week. While not necessarily an historical extreme, this is among the highest readings for the indicator in the last six months, suggesting that a potential near-term bullish extreme may be approaching:

Source: Alternative.me

Another way of gauging sentiment, flows into exchange-based cryptoasset investment vehicles, have gone vertical over the last week. As of writing before the release of Friday’s data, Bitcoin ETFs have seen stellar inflows of over $1.8B over the last four days. Over the long-term, inflows from “tradfi” investors provide incremental demand for Bitcoin and could help support the price.

Source: Farside Investors

Bitcoin Technical Analysis: BTC/USD Daily Chart

Source: StoneX, TradingView

For weeks, we’ve been saying that we’ll be waiting for a breakout of at least the channel top near $68K to shift the medium- and longer-term biases back in favor of the bulls… and that’s exactly what we appear to have gotten last week. While some bulls may want to be cautious as long as the cryptocurrency remains below its record high near $73K, there’s no denying that the technical outlook is more bullish than it’s been in weeks if not months. Only a reversal back into the 7-month bearish channel would call the bullish bias back into question.

Ethereum Technical Analysis: ETH/USD Daily Chart

Source: StoneX, TradingView

As has been the case all year, Ether is underperforming its big brother.

. Bulls will want to see ETH/USD regain key previous-support-turned-resistance at $2850 to paint a more bullish picture for Ether, whereas a break below $2125 support could set the stage for a continuation toward the next level of support near $1700.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos and be sure to follow Matt on Twitter: @MWellerFX