Cryptos prepare for a tumultuous period – Crypto News
- Cryptocurrencies are on the back foot this week
- Bitcoin continues to outperform ethereum
- US and Japan elections to impact cryptocurrencies
- Bitcoin fails to break above $70k level
Mixed performance by the key cryptocurrencies
The cryptocurrency market is starting to feel the chills as the US election is less than a fortnight away. Actual voting is underway with more 25m Americans having already cast their votes, particularly in the crucial states that will determine the election’s outcome.
Bitcoin has had a decent run in October, benefiting from Trump's resurgence in the polls. It climbed aggressively higher, but it failed to trade above the $70k psychological level, prompting a small correction. The king of cryptos is around 5% in the green in October – the so-called Uptober – but the remaining main cryptocurrencies are having mixed performances.
Both solana and doge are recording double-digit gains, following an equally strong September, while ethereum continues to underperform. Interestingly, XRP from Ripple labs is suffering significant losses as the Securities & Exchange Commission’s (SEC) lawsuit against Ripple is a significant bearish factor. In the meantime, as a comparison, the S&P 500 index is around 1% lower in October and gold is almost unchanged in the same period.
US and Japan elections come into play
Trump’s pro-crypto stance and Harris’s intention to introduce a regulatory framework for the crypto market have allowed crypto hawks to openly talk about a significant price rise post November 5. Confirmation of this rhetoric could create a FOMO (fear of missing out) sentiment in the market, leading to further price gains for cryptocurrencies. On the other hand, this expectations’ build up is raising the possibility for an acute bearish reaction if cryptos do not deliver the price jump anticipated after the US election.
Interestingly, the Japanese general election will be held on October 27. Among other issues, cryptos have come into discussion with the leader of one of the smaller parties advocating for a significant tax reform. Currently, profits from crypto investments are subject to a tax rate of up to 55%, while ETFs are taxed based on the capital gains tax rate of about 20%. An adjustment in cryptos’ tax treatment and a possible rules-change allowing Japanese investment funds to invest in crypto-based products could really ignite cryptos’ demand in Japan.
Bitcoin’s correlation with key assets
Based on the three-month correlation, using daily returns, bitcoin continues to experience high correlation with US equities. Interestingly, at the same time, bitcoin also enjoys a strong correlation with gold, the highest level since June 2023, but not high enough for bitcoin to be universally recognized as a gold alternative. Correlation with euro/dollar, oil and the 10-year US Treasury are close to zero at this juncture.
The technical picture remains positive for bitcoin
Bitcoin’s failure to achieve a daily close above the $70k level has caused a small downleg. The king of cryptos is hovering above the 23.6% Fibonacci retracement of the January 23, 2024 - March 14, 2024 uptrend at $65,460. A break below this area could result in a more protracted move lower towards the busier $62,378-63,234 area, which is crucial from a sentiment perspective.
On the other hand, a move above $70k could open the door to a retest of the mid-June highs. The 2024 high at 73,800 would then be just a hair's breadth away.
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
