Why has BTC been weak recently, diverging from the trend of the US stock market?
"Golden September and Silver October," can Bitcoin stage an October offensive?Author: BitPush
The correlation between the US stock market and Bitcoin has always been high. Why have Bitcoin and the US stock market diverged in their trends in the past two days? On October 9, the sharp decline in Bitcoin may be related to the new HBO documentary "Cryptocurrency: The Mystery of Bitcoin." What are the underlying reasons? With the "golden September and silver October," can Bitcoin stage an offensive in October? The author believes that while there are indeed many positive signs, overall, some unexpected events may hinder Bitcoin's rise in October, and caution should still be maintained.
Bitcoin and US Stock Market Diverge Again; A-shares Cooling May Help Capital Flow Back
The correlation between Bitcoin and the US stock market has always been high, but in the past two days, a divergence has occurred again. In the early hours of October 10, US stocks closed higher on Wednesday, with the Dow Jones and S&P 500 indices both hitting record highs. Against the backdrop of US stocks reaching new highs, Bitcoin has seen a continuous decline. What is the reason behind this?
The global financial market is like a pool of water; wherever there is a profit-making effect, it will become a gathering place for capital. There are clear signs of capital fleeing the crypto market to the A-share market. Recently, a wave of wealth-making in the A-share market has swept the globe. On October 8, the trading volume of the Shanghai and Shenzhen stock exchanges broke 3 trillion yuan for the first time in history, reaching 3.45 trillion yuan, a significant increase of over 800 billion yuan compared to September 30. Almost all sectors rose, with brokers and semiconductors experiencing a collective surge. The market saw a broad upward trend, with 5,029 stocks rising, 791 stocks hitting the daily limit, and 291 stocks declining. Even more rarely, on that morning, hundreds of broad-based ETFs hit their daily limit, while ETF market transactions expanded. The latest weekly data from global capital flow monitoring agency EPFR shows that as of the week ending October 2, emerging market equity funds tracked by EPFR recorded the second-largest weekly inflow of funds this year, marking the 18th consecutive week of net inflows, with almost all of these funds flowing into the Chinese market. David Skarica, a senior strategist at Gain Capital, told reporters that the flow of funds is always crucial, and currently, global investors still have relatively light positions in the Chinese stock market. He cited Goldman Sachs channel data, stating that although hedge funds have rapidly increased their exposure to the Chinese market recently, it is still at the 55th percentile of the five-year range, while this figure reached the 91st percentile in January 2023. This also means that sudden market changes may lead to foreign capital continuing to increase its allocation to the Chinese stock market.
In addition to the continuous inflow of funds, positive policies have also been consistently introduced in China. Most people in the A-share market believe this will lead to an unprecedented bull market. In addition to the two structural monetary policy tools established by the central bank, to implement the new "Nine National Policies," on September 24, the China Securities Regulatory Commission issued "Opinions on Deepening the Reform of the Mergers and Acquisitions Market for Listed Companies," further stimulating the vitality of the mergers and acquisitions market and supporting listed companies in injecting quality assets to enhance investment value; the "Guidelines for the Supervision of Listed Companies No. 10 - Market Value Management (Draft for Comments)" was publicly solicited for opinions, requiring listed companies to enhance their quality as a basis for promoting the increase in investment value. Furthermore, on September 26, the Central Financial Office and the China Securities Regulatory Commission jointly issued "Guiding Opinions on Promoting Long-term Capital into the Market," aiming to unblock the barriers for social security, insurance, and wealth management funds to enter the market and strive to boost the capital market.
Currently, the A-share market is seen as an investment haven in the global financial market, showing clear signs of capital inflow, which has also led to noticeable capital flight from the crypto market. This is specifically reflected in the continuous negative premium of USDT and the outflow of Bitcoin ETF funds. However, with the recent surge in A-shares, the market is experiencing a correction, and it is expected that A-shares will need to undergo a period of adjustment, which may slow the outflow of capital from the crypto market. Nevertheless, considering the currently low valuation of A-shares, it cannot be ruled out that capital may further flee from the crypto market or reduce investments in crypto assets, which would undoubtedly be detrimental to Bitcoin's rise.
Potential Sale by the US Government May Weigh on Bitcoin
Since June this year, a major wave of selling in Bitcoin has come from the German government, the US government, and the sequential selling pressure from Mt. Gox compensation. Recently, expectations of selling pressure from the US government may also become a potential factor weighing on Bitcoin. According to Lookonchain, the US government seems to be free to sell 69,370 Bitcoins seized from Silk Road. On October 7, the US Supreme Court refused to hear the case regarding the ownership of the 69,370 BTC (approximately $4.33 billion) seized from Silk Road, allowing the government to have complete control over the seized funds.
The author believes that the Biden administration may not be very friendly towards the crypto market, and the US government seems likely to sell. The last time the US government sold was two months ago when it moved 29,800 BTC (approximately $2.02 billion), of which 10,000 BTC (approximately $594 million) were transferred to Coinbase Prime. Currently, the market is also concerned about the crypto outlook if the Democratic candidate Kamala Harris wins. Bernstein analysts stated that if Kamala Harris wins, Bitcoin may test the $40,000 range again.
In addition to the potential selling pressure from the US government, the new HBO documentary "Cryptocurrency: The Mystery of Bitcoin" may also have triggered some market panic, becoming a major reason for Bitcoin's decline on October 9. This new HBO film, directed by the renowned director Cullen Hoback, who is known for his investigative work, primarily attempts to reveal the identity of Satoshi Nakamoto, which has attracted widespread attention in the market. Currently, the Bitcoin held by Satoshi Nakamoto is valued at $68 billion, which is an enormous figure. For the market, if this person is indeed confirmed to be the founder of Bitcoin, it would certainly be an exciting event, but it may not necessarily be so for the market.
The HBO documentary has sparked significant controversy. Cullen Hoback believes there is substantial evidence that Peter Todd is Satoshi Nakamoto, but many professionals in the crypto market disagree. Some professionals point out that HBO got Peter Todd's timeline wrong throughout the documentary, mistakenly believing he is Satoshi Nakamoto; in fact, Peter Todd was not even 16 years old in 2008, which is inconsistent with age, and his life and experiences differ greatly from what is known about Satoshi Nakamoto. Moreover, Todd has long served as an advisor for multiple projects; if he were indeed Satoshi Nakamoto, his Bitcoin wallet would not have remained completely inactive for so many years. Peter Todd himself is also very dissatisfied and has publicly denied being Satoshi Nakamoto, repeatedly stating on social media that Hoback's theory is absurd.
Golden September and Silver October? Bitcoin Still Needs Technical Drivers
Although Bitcoin has shown weakness recently, the market remains optimistic about its future performance. Besides the Fed's interest rate cuts, the main supporting evidence is the growth in the market capitalization of USDT.
Data from CryptoQuant shows that at the end of September, the liquidity of stablecoins continued to grow to a record $169 billion, a 31% increase year-to-date (YTD). Dominating the market is Tether's USDT, whose market capitalization increased by $28 billion, reaching nearly $120 billion, accounting for 71% of the market share; Circle's USDC also saw its market capitalization increase by $11 billion, reaching $36 billion, a 44% increase year-to-date, accounting for 21% of the market share. The record number of dollar stablecoins and the surge in large Bitcoin transactions may lay the foundation for a broader rise in BTC in the coming weeks, keeping the bullish seasonal trend for the asset intact in October.
The author believes that the bullish expectations for A-shares are very evident, and the global financial market continues to speculate on A-share expectations, which will essentially lead to capital outflows or reduced investments in the crypto market. In addition, the outcome of the US election will be a significant influencing factor. If Trump is elected, his positive embrace of cryptocurrencies will undoubtedly provide a direct stimulus to Bitcoin; however, if Harris is elected, the outcome for Bitcoin is uncertain, and further deep corrections cannot be ruled out, which will be seen in November. Overall, the author maintains a cautious attitude towards Bitcoin's performance in October. From a longer-term perspective, the crypto market still needs technical drivers, as mere financial stimulus is unlikely to create sustained prosperity.
