First Mover: Bitcoin Heads for 24% October Gain as U.S. Election Countdown Begins

October 30, 2020

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By the CoinDesk Markets Team

Edited by Bradley Keoun

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Bitcoin (BTC)

-0.8% $13,367

Ether (ETH)

-2.0% $379

(Price data as of Oct. 28 @11:46 UTC)

TODAY:

Price Point: Bitcoin is up 24% in October, showing investor appeal during a month when both U.S. stocks and gold slipped.

Market Moves: Pantera's Dan Morehead looks at negative images of GDP charts and counts words in Satoshi Nakamoto's white paper to chronicle bitcoin's "movement."

Bitcoin Watch: Election-related turmoil could send prices toward support level around $12,500, but traders would likely buy the dip, CoinDesk's Omkar Godbole writes.

What's Hot: Bitcoin transaction fees jump to highest in 28 months, OKEx plans for Bitcoin Cash hard fork, ECB signals plans for further stimulus.

Price Point

Bitcoin was lower around $13,400 though was on track to gain 24% in October, an impressive performance since U.S. stocks declined 1.6% on the month and gold slid 0.5%.

"With the U.S. election just days away, we are going to have to be patient when it comes to headwinds lifting BTC to new multi-year highs," Matt Blom, head of sales and trading for the cryptocurrency-focused financial firm Diginex, wrote in a note to clients.

In traditional markets, European stocks fluctuated and U.S. futures pointed to a lower open. The dollar was steady in foreign exchange markets and 10-year U.S. Treasury yields rose 0.01 percentage point to 0.83%.

“Our short-term risk-appetite indicator is firmly in negative territory,” said Jean-Francois Paren, head of global markets research at Credit Agricole CIB, in a note to clients, according to Bloomberg News.

Market Moves

There's an undercurrent in the crypto industry where true believers like to paint the future of money as less about, well, money than about truth and exposing the flaws and failings and abuses and wrongs of the traditional financial system and economy.

It's not just about getting rich. It's about reimagining the entire system, starting from scratch with state-of-the-art technology and fresh ideas, a complete reset.

It's also about convincing everyone else that the mission is worthy, perhaps inevitable – on the right side of history.

Such is the backdrop for the latest monthly letter from Dan Morehead, a former Goldman Sachs derivatives trader and hedge-fund manger who now runs the cryptocurrency investment firm Pantera Capital in San Francisco.

The missive includes a clever table intended to demonstrate just how succinct, concise, laconic, crisp, efficient, compact, etc. that Bitcoin founder Satoshi Nakamoto was when he penned the white paper that served as the intellectual, logical, economic and mathematical foundation for the original and still-largest blockchain-cum-cryptocurrency.

Nakamoto needed just 3,192 words for the blueprint, or less than a tenth of the book of Genesis from Hebrew and Christian sacred texts. The number is half as many as it took to pen the U.S. Constitution and about 1% of Adam Smith's seminal Wealth of Nations.

Word counts of seminal texts, compared with Satoshi Nakamoto's Bitcoin white paper. (Pantera)

Blockchain for Dummies, a dumbed-down instructional book on blockchain, needed 20 times as many words to explain the technology as Nakamoto's white paper.

But aside from pointing out the elegant genius of bitcoin's (possibly?) pseudonymous founder, the essential crypto viewpoint is one of trying to look at the world in just the right way. According to Morehead, the following chart offers a key reminder that as global economies bounce back from the coronavirus-triggered lockdowns earlier this year, the loss of output remains severe:

Chart showing lasting impact of economic loss. (Pantera/Goldman Sachs)

The point was to illustrate the lack of context for Thursday's U.S. government report that the world's largest economy surged 33% in the third quarter, as the lockdowns eased. To put it in market terms, it was perhaps the biggest dead-cat bounce in world history, measured in dollar terms.

With the economy in shambles, the thinking goes, massive stimulus will be needed from the government and Federal Reserve, eventually debasing the dollar and pushing up prices for bitcoin. (Deribit, the biggest cryptocurrency options exchange, just listed a contract that allows traders to bet on a price rally to $40,000 next year, triple the current price.)

Morehead wrote in the letter that a recent rush into bitcoin by big players like PayPal, MicroStrategy and Paul Tudor Jones might ultimately give more big players cover to follow.

This isn't about greed, or the future of money. It's about right and wrong, or rather who's right, and who's wrong.

"A movement doesn’t succeed because of its initial leader," Morehead wrote. "Rather, it’s the first follower and the subsequent followers who make it work. The more who join in, the less risky it is to take part in it. Those who were on the fence before, have fewer excuses as the movement grows."

For anyone wondering, Pantera's full monthly newsletter clocked in at about 3,130 words. For what it's worth.

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Bitcoin Watch

Bitcoin daily price chart showing support at $12,500. (TradingView)

While the market environment is currently not conducive for bullish price action in bitcoin, the cryptocurrency is unlikely to see a meteoric fall, according to analysts.

"Given the upcoming U.S. elections, and meltdown in the legacy markets, traditional investors will maintain a risk-off mindset," trader and analyst Nick Cote told CoinDesk in a Telegram chat.

Some observers say the U.S. could face a constitutional crisis if Democratic candidate Joe Biden wins by a thin margin and President Donald Trump tries to cast doubt on the results. The election uncertainty, coupled with coronavirus resurgence in the U.S. and across Europe, has triggered risk aversion in stock markets this week and applied brakes to bitcoin's price rally.

The anti-risk mood could prevail at least till Nov. 3. As such, Patrick Heusser, senior cryptocurrency trader at Crypto Broker AG, is calling for caution on the part of short-term speculators. "I am expecting an increase in volatility and would be careful with setting stop losses too tight," Heusser said. "Traders should maintain a low risk profile right now."

Bitcoin is currently trading in the red near $13,300, representing a 1% drop on the day. Should the risk aversion in traditional markets worsen, the cryptocurrency may revisit support at $12,500-$12,000.

"If prices were unable to hold the bullish throwback [bull market pullback] to $12,200-$12,000, the focus would shift to next major support levels at $11,100 and $10,800," Cote said.

That said, a price crash looks unlikely, as major central banks are already printing massive amounts of fiat money, and the cryptocurrency is currently backed by a strong bullish narrative of increased institutional participation.

Besides, if there are widespread lockdowns and renewed economic slowdowns, central banks are expected to step in with additional stimulus, fueling inflation fears and boosting demand for bitcoin, according to Cote.

All things considered, dips in bitcoin could be short-lived.

On the higher side, the June 2019 high of $13,880 is the immediate resistance, followed by the next daily resistance block at $15,800-$16,000. There are large offers near $14,000 on cryptocurrency exchange Bitfinex, according to Heusser.

Token Watch

Bitcoin (BTC): Cryptocurrency's price rally spurs increase in transactions just as end of China's rainy season prompts bitcoin miners to pare back, creating congestion and pushing up transaction fees to the highest in 28 months.

Bitcoin Cash (BCH): Crypto exchange OKEx, still paralyzed by founder's arrest, details plans for how to handle November hard fork.

Uniswap (UNI): Uniswap's $40M governance vote closes on Halloween and some holders fear for price.

Harvest Finance (FARM): DeFi yield aggregator boosts bounty to $1M from $100K for information leading to return of $24M in funds siphoned via this week's exploit.

Ripple (XRP): Blockchain payments firm put $9.3M into partly-owned remittance giant MoneyGram in 3Q.

Analogs

ECB signals further stimulus ahead to prop up struggling economy (WSJ)

Central banks were net sellers of gold in third quarter for first time in decade as prices neared record (Bloomberg)

Small-cap stocks buoyed by bets on Biden-led stimulus (WSJ)

Swiss bank Credit Suisse targets share buyback up to $1.6B even with loan-loss provisions running at 8 times the 10-year average (WSJ)

Sales of $5M-plus homes in New York's The Hamptons quadruple in third quarter as rich New Yorkers flee city (WSJ)

Exxon Mobile to slash 15% of global workforce, including 1.9K jobs in U.S., as anemic economy dents oil demand (WSJ)

Tweet of the Day

Most Influential 2020: Cast Your Vote

Every year, CoinDesk recognizes the “Most Influential” people working to expand cryptocurrency and blockchain’s reach. It’s a list of the 10 outsized individuals who have gone the furthest and done the most.

In this most unusual year, we need your help determining who should be named as Most Influential. Check out the list of the top contenders and cast your vote by Oct. 31.

With the U.S. Election Day next week, much is at stake - including crypto policy over the next four years.

Like it or not, this election will matter for the crypto industry. Our latest limited-run newsletter, The State of Crypto: Election 2020 by regulatory reporter Nikhilesh De, aims to walk you through why.

At stake: Will new crypto products be approved or allowed to operate in the U.S.? Will regulators target more overseas exchanges and platforms like BitMEX? Will the U.S. launch a “digital dollar” or some other form of central bank digital currency?

These questions will come down to who takes the reins at the various financial regulators and government departments. Over the next several days, we map out the possible outcomes and introduce analysis of the candidates.

Our limited-run newsletter runs Mondays, Wednesdays and Fridays at least until Election Day. Subscribe to The State of Crypto: Election 2020.

On Purpose podcast host and Onramp Invest CEO Tyrone Ross invites the public to CoinDesk’s first podcast live taping party on Wednesday, Nov. 3.

Attendees will be part of the experience and get to ask frank questions to Ross and his guests Adam Pokornicky, COO of Digital Asset Investment Management; Andy Edstrom, financial adviser and investor at WESCAP Group; and Sunayna Tuteja, head of digital assets at TD Ameritrade; as they raise the big questions for financial advisors in a jargon-free, transparent discussion.

Pokornicky, Edstrom and Tuteja, who are also speaking at CoinDesk’s Bitcoin For Advisors event for registered investment advisers Nov. 9-10, are experts in the digital asset class in the context of how it fits in the realm of portfolio management, including understanding bitcoin’s macro implications, preparing against bitcoin’s volatility and how to fold it into retirement accounts.

CoinDesk's upcoming virtual event Bitcoin for Advisors, on two half days Nov. 9-10, aims to equip investment advisors with tools to better understand bitcoin, talk to their clients about it and work it into their business.

In close cooperation with professional advisors, CoinDesk is showcasing a program tailored to the financial advisor community. Through a series of keynotes, panels and interactive roundtable sessions, we will discuss investment theses for bitcoin, why younger demographics are turning to this asset and how it fits into the current global macroeconomic picture.

We will also walk through the practicalities: how to answer client questions about bitcoin, how to talk to your compliance department about bitcoin, how can bitcoin can help grow your book. Apply for Bitcoin for Advisors, Nov. 9-10.

Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.

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