Market analysis with Mike Ermolaev
What's happening in crypto? Every week, our regular guest expert Mike Ermolaev covers the latest trends and news shaping the market.
This week, we have a number of positive developments for Bitcoin, including endorsement from the Democratic presidential nominee Kamala Harris.
Bitcoin Stabilizes, Short-Term Holders Show Resilience
Over the past week, Bitcoin traded between $62,340 and $65,501, aided by the Federal Reserve's 0.5% rate cut.
Glassnode reports this helped Bitcoin reclaim key levels like the STH cost basis at ~$61.9K and the 200DMA at $63.9K. The stabilization eased selling pressure from short-term holders, and despite slower capital inflows, new investors remain resilient, showing confidence in Bitcoin’s long-term potential.
Source: Glassnode
Perpetual Futures Market Displays Cautious Recovery
The perpetual futures market shows cautious improvement, with the weekly average funding rate for long positions rising to 0.05%, though still below strong bullish levels.
Demand for long leverage remains muted, but a rise in the cumulative monthly premium from $1.7 million in mid-September to $10.8 million indicates a slight improvement in market sentiment. However, the market is still in a consolidation phase, cooling off from the highs of early 2023.
Source: Glassnode
Kamala Harris Backs Digital Innovation and Crypto Regulation
U.S. Vice President and Democratic nominee Kamala Harris recently pledged her commitment to fostering digital asset innovation during a fundraising event at Cipriani Wall Street.
Speaking to donors, she emphasized her tech-friendly stance, saying, "We will encourage innovative technologies like AI and digital assets while protecting our consumers and investors." Harris also vowed to create a regulatory environment with "consistent and transparent rules of the road." Her comments raised $27 million for her campaign and were praised by industry figures.
Standard Chartered analyst Geoff Kendrick predicts that a Trump victory could see Bitcoin surge to $125,000, while a Harris win may lead to a more modest target of $75,000.
Standard Chartered Sees Positive Growth Ahead
According to Standard Chartered, Bitcoin is well-positioned for sustained growth following the Federal Reserve’s recent 50 basis point interest rate cut. Geoff Kendrick, the bank's head of forex and digital assets research, believes that Bitcoin benefits from an ideal combination of macroeconomic factors, a boost that's helping it to move forward despite election uncertainties. In his view, digital assets stand to benefit from the strengthening bond market, led by the dramatic rise in the 2s10s yield curve.
Here is some more context on the metric he mentioned. This is the yield spread between 2-year and 10-year U.S. Treasury bonds, which had been negative since July 2022 but currently stands at 0.19%. A rise in investor optimism is often a green light for the economy. With confidence growing, riskier investments start to look more appealing, especially for those with a longer-term perspective.
Source: Ycharts
According to him, Bitcoin has reached a point where its growth is no longer primarily driven by election results or political parties, but by strong economic fundamentals, such as the increasing interest in spot Bitcoin ETFs, with October expected to bring a fresh wave of investment.
Global M2 Money Supply Hits Record High, Signaling Potential for Bitcoin Growth
The global M2 money supply has reached a new historical high of $107.86 trillion as of September 2024, reflecting steady growth over the past few months. According to recent data, the M2 supply has increased significantly from around $105 trillion in late June 2024, indicating a notable expansion in global liquidity.
From the Fed to the ECB and BoJ, this M2 measure monitors 21 global central banks’ money supply growth, providing a broad snapshot of the financial landscape, which encompasses cash, savings accounts, and short-term deposits. As regulators of liquidity, central banks determine how freely capital flows, tightening or loosening their financial policies as needed.
When central banks expand their money supply—typically by reducing interest rates or purchasing government bonds and securities—it increases liquidity in the financial system. Historically, Bitcoin has shown a strong positive correlation with such monetary expansions, as increased global liquidity, which has already been discussed, often coincides with rising demand for alternative assets like cryptocurrencies.
Source: Bgeometrics
The trend is particularly relevant now, as you can see from the chart, as Bitcoin has responded positively to the latest surge in M2 growth. When investors see more cash flowing through the system, it's a sign they're feeling confident about putting their money to work despite inflation and currency volatility. With cash flowing freely around the world, Bitcoin's chances of rebounding look increasingly strong.
Satoshi-Era Bitcoin Whales Awaken, Sparking Speculation
Some of the earliest Bitcoin mining addresses have become active again after almost 16 years of dormancy, Arkham Intelligence reported. On September 20, 2024, $15.95 million worth of Bitcoin (250 BTC) was moved from five addresses that had mined coins in January 2009, the first month of Bitcoin’s existence. These coins remained untouched since their creation, sparking interest within the crypto community. Despite the large transfer, the coins have not been sent to exchanges, suggesting the owner may continue to hold them.
Source: ArkhamIntelligence
Just days later, on September 24, 2024, another ancient Bitcoin whale, holding 1215 BTC valued at around $77 million, sent 5 BTC to Kraken. This whale’s Bitcoin, mined in early 2009, had been dormant for nearly 10 years after several moves between 2011 and 2014. Recent activity has seen 10 BTC moved to Kraken in three transactions over the past few weeks, raising speculation about the whale's motivations.
Most recently, on September 27, 2024, a 13-year-old Bitcoin whale that had not moved any coins since mid-2011 transferred 20 BTC ($1.27 million) to Bitstamp.
The crypto community stirred with speculation as long-dormant wallets suddenly spring to life, posing the possibility that other early Bitcoin adopters will soon follow their example.
U.S. Mining Gains Ground as China Retains Majority Bitcoin Hashrate Control
Meanwhile, American mining companies are gaining dominance in Bitcoin's hashrate, although China still controls 55%of the network's computing power, according to recent data from CryptoQuant CEO Ki Young Ju. U.S.-based mining pools have captured nearly 40% of the hashrate, a significant rise in influence as these pools primarily cater to large-scale institutional miners in America. In contrast, Chinese pools continue to support smaller miners across Asia, despite the country's 2021 crypto ban. As of September 2024, China maintains 54.86% of the global hashrate, while the U.S. commands 39.58%, showing the continued rivalry between the two countries for control of the Bitcoin network.
Source: CryptoQuant
The chart further highlights that smaller mining pools, such as those in the Czech Republic, account for 2.07% of the global hashrate, while Japan contributes a modest 0.94%. Other countries collectively hold 2.51%.
SEC Approves BlackRock Bitcoin ETF Options, Boosting Institutional Adoption
The US Securities and Exchange Commission (SEC) has greenlit the listing and trading of options for BlackRock's iShares Bitcoin Trust on the Nasdaq exchange. A brand-new option is emerging for institutional investors seeking to better control their Bitcoin investments. Traded under the "IBIT" symbol, these innovative instruments will let them more effectively manage their exposure to the largest cryptocurrency. This approval is “a huge win for the bitcoin ETFs “, asserts Bloomberg Intelligence analyst Eric Balchunas, thanks to the wave of liquidity it will unleash, enticing institutional investors to take the plunge. Moving forward, a crucial step remains: gaining the green light from both the Options Clearing Corporation (OCC) and the Commodity Futures Trading Commission (CFTC) before these options can finally hit the market. Balchunas, who gave 70% odds of approval by the end of May, called this a "nice surprise" in terms of timing.
