EMC Labs October Report: Monthly rise 10.89%, BTC may hit a new high after the chaos of the US election

Authored by: 0xWeilan

The information, views and judgments mentioned in this report regarding markets, projects, currencies, etc. are for reference only and do not constitute any investment advice.

Global macro finance welcomes a turning point in the turmoil in 2024.

With a large drop of 50 basis points in September, the US dollar has entered an interest rate cutting cycle. However, with the US presidential election and global geopolitical conflicts, the US economic employment data has been 'distorted', leading to increased divergence in traders' judgments on the future market. The US dollar, US stocks, and US bonds have all experienced severe fluctuations, making short-term trading more difficult.

Divergence and concerns in the US stock market are manifested as violent Fluctuation in all three major indices without direction. In contrast, BTC, which is relatively lagging in rise momentum, caught up in October with a big pump of 10.89%, and made a major breakthrough technically, once again approaching the upper boundary of the "new high consolidation zone", surging to $73,000 at one point.

BTC's internal structure remains perfect and is ready for a complete breakthrough, but externally it is still "suppressed" by US stocks trapped by uncertain election prospects. But the general election is just an episode and will not change the cycle operation. We judge that after the November election, after the necessary conflicts and choices, the U.S. stock market will recover, and if so, BTC will break through the all-time high and start the second half of the encrypted asset Bull Market.

Macro Finance: US Dollar, US Stocks, US Bonds and Gold

In October, after falling for three consecutive months, the US dollar index "unexpectedly" rebounded by 3.12%, rising from 100.7497 to 103.8990, returning to the level of January last year. The background of this rebound is the "Trump's victory", which traders believe will intensify the depeg between China and the US, pushing up inflation and making it difficult to ease interest rates. We believe that this rebound has priced in the expectation of "slowing down of interest rate cuts" beyond expectations, so the rebound of the US dollar index is difficult to sustain.

Monthly Trend of the US Dollar Index

The expected 'tax cuts' and 'depeg of China and the United States' in Trump's economic policy will inevitably lead to further rise in the scale of US debt. As the probability of Trump's victory increases, the yield of 2-year US Treasury bonds has risen sharply by 14.48% after a continuous decline in May, and the yield of 10-year bonds has risen sharply by 13.36%. The dumping of US debt is very serious.

Currently, the US stock market is trading around two main themes: the election of either Trump or Harris and the potential asset trends triggered by their economic policies, as well as whether the US economy will experience a soft landing, hard landing, or no landing at all.

October economic data CPI remained low, and the unemployment rate also remained low, which made people increasingly believe in the soft landing of the economy. This allowed the US stocks to stay near their all-time highs. However, the extremely low non-farm employment data and the loss of trading direction due to early completion of pricing and undecided elections have caused the traders to lose their way. The Q3 earnings reports of the 'Big Seven' companies have been gradually disclosed, with mixed performance. Against this backdrop, the Nasdaq reached a new high in the middle of the month but fell afterwards, with a monthly fall of 0.52%, and the Dow Jones fell by 1.34% in the month. Considering the significant rebound of the US dollar index, this is already a good result.

Only gold receives the support of safe-haven funds, with London Gold monthly pump 4.15%, rising to $2789.95 per ounce. The current momentum of gold's strength comes not only from safe-haven funds but also from the continuous increase in holdings by Central Banks of multiple countries (replacing a portion of the dollar holdings with their own currency as value reserves).

encryption assets: effectively breaking two major technical indicator

In October, BTC opened at $63305.52 and closed at $70191.83, with a monthly pump of 10.89% and a volatility of 23.32%, with moderate volume expansion. For the first time since the adjustment in March, it has achieved two consecutive months of increase.

BTC daily candlestick trend

From a technical indicator perspective, BTC has achieved several major breakthroughs this month; it has successfully broken through the resistance of the 200-day moving average and the downward trend line since March (the white line in the chart). The breakthrough of these two major technical indicators indicates an improvement in the long-term trend, which can temporarily dispel concerns about the crypto market turning bearish.

Currently, the market is in the retracement stage after probing the upper edge of the 'new high consolidation zone'. Next, we will focus on following two technical indicators, one of which is the upper edge of the 'new high consolidation zone' (at $73,000) and the rise trend line (currently around $75,000). As previously reported, a valid breakthrough of the 'new high consolidation zone' signifies the end of a long 8-month consolidation, while stepping back on the rise trend line signifies the arrival of a new bull market (i.e., the second wave of the main uptrend).

BTC monthly trend

On the monthly chart, it can be seen that since August, the low price of BTC has been steadily rising. This turning point is based on two factors: the continuous improvement of global liquidity since the rate cuts by the Federal Reserve, the European Union, and China, as well as the internal adjustment of encryption assets, namely the transformation of the holding structure from short to long term.

Long and Short Game: Enhanced Liquidity or Triggering the Launch of the Second Wave of Dumping

EMC Labs October Report: Monthly rise 10.89%, BTC may hit a new high after the chaos of the US election

Long hands, short hands, CEX and Miner BTC holdings distribution (monthly)

In the previous report, EMC Labs pointed out that with the development and adjustment of the encryption asset Bull Market, Changshou will experience two waves of dumping, thus throwing back the chips accumulated during the market downturn.

In this cycle, the first wave of dumping by long positions started in January this year and lasted until May, then turned to re-accumulate until October. The Fed's first rate cut in September improved the liquidity of the crypto market, and long positions began to push the coin-holding structure from long to short. The dumping scale this month is close to 140,000 coins.

This is the result of the improvement in Liquidity due to the interest rate cut by the Federal Reserve, and it is also a necessary stage in the cyclical operation. Of course, we need more time to confirm the sustainability of this dumping, and overall we tend to believe that the second wave of dumping has already begun. Unless there is a turnaround in the interest rate cut by the Federal Reserve, this process will continue in the medium to long term.

Accompanying this is the continuous strengthening of market Liquidity.

Liquidity Strengthened: Buying power comes from the BTC ETF channel

For the crypto market, the start of the interest rate reduction cycle is of extraordinary significance. To some extent, the pump of BTC last year was driven by the anticipation of interest rate cuts and the early pricing of the BTC ETF channel opening. The adjustment since March can also be understood as a market correction before the start of the interest rate reduction.

Monthly statistics of capital inflows and outflows in the encryption asset market (Stablecoins+BTC ETF)

This judgment is based on our statistics of the inflow and outflow of funds in the BTC ETF channel. From the above chart, it can be seen that after March, the funds in this channel showed signs of slowing down or even flowing out. This downward trend has improved since October.

EMC Labs monitoring shows that in October, a total of 11 BTC ETFs in the United States recorded a total fund inflow of $5.394 billion, the second largest inflow month on record, second only to $6.039 billion in February this year. This large inflow provides fundamental support for BTC price to challenge the previous high.

However, stablecoin channels saw very weak performance in October, with only USD 47 million inflows for the month, the worst monthly performance so far this year.

Stablecoin monthly inflow and outflow statistics

Stablecoin channel funds are weak, which can be used to explain that although BTC is challenging its previous high, the performance of Altcoin is very poor. The funds of the BTC ETF channel cannot benefit Altcoin, which is one of the significant changes in the structure of the encryption asset market and deserves close attention.

Among them, the significant increase in funds in the BTC ETF channel includes the element of "Trump trading". Due to Trump's enthusiasm for Crypto, people speculate and buy in hopes of short-term profits. This is worth following. With the US presidential election on November 4th and around it, there may be significant fluctuations in the market in the short term.

Conclusion

According to the 13F reports submitted by US institutional investors, there were 1,015 institutions holding BTC ETF in Q1 2024, with a total value of $11.72 billion. In Q2, the number of institutions holding BTC ETF exceeded 1,900, with a total value of $13.3 billion, and 44% of institutions chose to increase their holdings. Currently, the BTC managed by BTC ETF has exceeded 5% of the total supply, which is a noteworthy breakthrough.

The BTC ETF channel has already taken control of the medium and long-term pricing power of BTC. In the long run, during the interest rate reduction cycle, funds from the BTC ETF channel are expected to continue to flow in, providing substantial support for the long-term trend of BTC prices. However, there are still many uncertainties in the short and medium term.

Based on the comprehensive internal structure and macro financial trends, EMC Labs maintains its previous judgment that BTC is likely to break through the previous high in Q4 and start the second half of the bull market. In the crypto market, the start of the second half of the Altcoin bull market is based on the premise of the recovery of stablecoin channel inflows.

The greatest risk comes from the US election results, whether the interest rate cuts can proceed smoothly according to market expectations, and the stability of the US financial system.