Bitcoin

As the United States inflation data continues to outperform expectations, Bitcoin is struggling to maintain the crucial $26,800 support level, just ahead of the Wall Street opening on October 12.

CPI Data Surprises Market

CPI data for September, reported by the U.S. Bureau of Labor Statistics, revealed a year-on-year increase of 3.7%, slightly surpassing the anticipated 3.6%. Excluding food and energy, the figure stood at 4.1%, in line with forecasts. This persistent inflation trend has added to the growing concerns in the market.

Fed target rate probabilities chart. Source: CME Group

The current situation has raised questions about the Federal Reserve’s monetary policy. With the Producer Price Index (PPI) and Personal Consumption Expenditures (PCE) both indicating rising inflation, the ability of the Fed to cut interest rates in the near future is under scrutiny. The notion of “higher for longer” interest rates in the U.S. could lead to increased pressure on risk assets, including cryptocurrencies.

Fed’s Next Moves

Despite CPI data exceeding expectations, the likelihood of the Federal Reserve raising rates further at the upcoming Federal Open Market Committee (FOMC) meeting on November 1 remains minimal at just 7.4%, according to CME Group’s FedWatch Tool.

BTC/USD 1-hour chart. Source: TradingView

Bitcoin market participants are cautious, with little optimism for an immediate upside. Traders are closely monitoring the $26,800 level, hoping for it to become a solid support zone. Material Indicators suggests limited bid liquidity beyond $24,750, a key level from the past two quarters.

Market Sentiment

Market sentiment leans toward a bearish outlook for Bitcoin. The prevailing sentiment is that macroeconomic factors, alongside geopolitical tensions, make it challenging for Bitcoin to experience a significant upward movement. With the “good = bad” equation, as one commentator put it, many are cautious about Bitcoin’s prospects in the short term.

As Bitcoin navigates these complex market dynamics, traders are eyeing the key support levels around 25-26k and the resistance levels at 29-30k as critical indicators to determine the cryptocurrency’s next trend. The downward trajectory of Bitcoin and other major altcoins like Ether continues despite various potential bullish factors in Q4, according to trading firm QCP Capital.

An amended filing for the joint spot Bitcoin exchange-traded fund (ETF) by ARK Invest and 21Shares has emerged as a promising sign of progress toward approval. This updated filing, submitted on October 11 to the Securities and Exchange Commission (SEC), includes additional details regarding the proposed Bitcoin ETF’s operational aspects, addressing concerns raised by the SEC.

Addressing SEC Concerns

Bloomberg’s senior ETF analyst, Eric Balchunas, emphasized that the changes in the filing could be seen as a direct response to concerns expressed by the SEC. These adjustments, according to Balchunas, indicate that ARK has taken into account the SEC’s comments and has effectively addressed them, effectively putting the ball back in the SEC’s court. Balchunas views this as a positive sign of solid progress toward ETF approval.

Balchunas noted that the changes made to the filing are spread throughout, resulting in a document that is five pages longer. He also mentioned that none of the comments raised by the SEC were particularly new or insurmountable.

This is also new (and again something we heard SEC asked about): “The Trust’s assets with the Custodian are held in segregated accounts on the bitcoin blockchain, commonly referred to as “wallets,” and are therefore not commingled with corporate or other customer assets.” pic.twitter.com/57TmnNi1lE

— Eric Balchunas (@EricBalchunas) October 11, 2023

One noteworthy change is ARK’s acknowledgment that the fund’s net asset value (NAV) calculations do not align with Generally Accepted Accounting Principles (GAAP), which is a standard used by the SEC.

Clarity on Asset Custody

The amended filing provides clarity about the custody of the ETF‘s assets, which are held by Coinbase Custody. It explicitly states that these assets are kept in “segregated accounts” and are not commingled with corporate or other customer assets. This clarification suggests effective communication between ARK and the SEC about addressing the regulator’s concerns.

Positive Signs for Future Approval

Still chuckling a bit at this “electricity usage” risk factor. Ark couldn’t even be bothered to put in a coherent header summary or more than a couple short sentences. You know the convo w/ the SEC was like “oh yea, good call Mr. SEC attorney, this is definitely material /s” https://t.co/unIArFDKl8

— Scott Johnsson (@SGJohnsson) October 12, 2023

According to Scott Johnsson, a general partner at Van Buren Capital, another noteworthy addition in the amended filing is a comment related to Bitcoin’s potential use for illegal purposes and its environmental impact due to mining. The filing acknowledges that these factors could impact the ETF‘s value. Johnsson’s assessment of ARK’s amendments indicates that the agency does not appear to be creating unnecessary roadblocks through the disclosure review process.

Hut 8 is steadily accumulating self-mined BTC as it moves forward with its merger plans with US Bitcoin (USBTC). In September 2023, Hut 8 mined 111 Bitcoin, increasing its self-mined BTC holdings to an impressive 9,366 Bitcoin.

Steady Accumulation Despite Mining Pace Decline

Despite witnessing a decline in monthly mining volumes, Hut 8 remains committed to its hodl (hold) strategy, a rarity among cryptocurrency miners. The 8% increase in Bitcoin mined in September compared to the previous month is a positive sign, although it is significantly lower than the 147 BTC mined in May 2023. Over the past year, the company’s monthly mining volumes have dropped by nearly 60%, falling from 277 BTC in September 2022.

During the month of September, Hut 8 did not sell any of its Bitcoin holdings, emphasizing its position as one of the largest publicly traded firms with substantial self-mined BTC reserves. As of September 30, the company held 9,366 Bitcoin, of which 7,269 were unencumbered.

Long-Term Hodl Strategy Sets Hut 8 Apart

Hut 8’s decision to continue accumulating Bitcoin sets it apart from other miners who have been forced to sell portions of their holdings due to challenging market conditions. Notably, companies like Core Scientific and Riot Blockchain have had to liquidate some of their Bitcoin holdings.

Hut 8’s expansion of its BTC reserves aligns with its long-term hodl strategy. In September 2022, the company held around 8,000 BTC, indicating consistent growth in its holdings over time.

Progress on USBTC Merger and Diversified Revenue Streams

Hut 8 also reported progress in its merger with USBTC, which was announced in February 2023. The merger, set to create a new entity called Hut 8 Corp or “New Hut,” received final approval from the Supreme Court of British Columbia in September 2023.

Hut 8 CEO Jaime Leverton expressed gratitude to shareholders for their overwhelming support of the merger and highlighted that the recent court approval enables the company to advance toward creating New Hut. Leverton emphasized that the new entity will feature “highly diversified fiat revenue streams,” positioning Hut 8 for continued success in the evolving cryptocurrency landscape.

Market observers suggest that Bitcoin’s current sideways price action could shift to a bullish trend in November, mirroring patterns from previous cycles. According to crypto analyst Miles Deutscher, historical data shows that Bitcoin typically experiences sideways price action in the period from Q2 to Q4 in pre-halving years. He points out that November 21 has historically been a key pivot point for Bitcoin’s price to start trending upward in the lead-up to the next halving event.

Historical Patterns

In the past, Bitcoin has exhibited similar sideways price action before turning bullish. For instance, in 2015, after six months of sideways trading, BTC’s price began to rise around November. A similar pattern occurred in 2019, with most of the year characterized by flat price movement before a late-year surge.

BTC price performance after each halving. Source: @milesdeutscher on Twitter

Bitcoin is currently trading approximately 60% below its all-time high, which aligns with historical trends from 2015 and 2019. Some analysts believe that a potential “dump” or price bottom could occur around November 10-15. The Bitcoin halving is expected to take place in late April or early May of the following year.

Bitcoin Halving in Just 200 Days 😳

Ever wondered where Bitcoin was 200 days before in the previous halvings?

In 2016, BTC was -65% below its ATH.

In 2019, BTC was -60% below its ATH.

In 2023, BTC is currently -60% below its ATH.

So, even if it seems like Bitcoin’s price… pic.twitter.com/H8dlWcM91y

— Mags (@thescalpingpro) October 9, 2023 

Factors Influencing Price

Markus Thielen, the head of research at Matrixport, suggests that Bitcoin’s price surge could be influenced by macroeconomic factors, similar to what happened in 2019 when the Federal Reserve paused its interest rate hikes, leading to a significant increase in Bitcoin prices.

Fed rate hikes and BTC price. Source: Matrixport

While various factors may influence Bitcoin’s price in the short term, most analysts and observers agree that the next major bull market is likely to occur in the year following a Bitcoin halving event.

As November approaches, market participants will be closely watching Bitcoin’s price action to see if historical patterns repeat themselves, potentially ushering in a bullish trend.