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| By Marija Matic |
As my colleague Juan Villaverde pointed out on Friday the recent geopolitical tensions in the Middle East have been weighing on not just crypto, but all risk assets.
This is a tough position to be in as an investor. Moments like these are when you have to block out the fear and speculation to act logically.
Fortunately, though, Bitcoin (BTC, “A”) investors haven’t had to fight off too much FUD. (That’s “fear, uncertainty and doubt” in crypto-speak).
That’s because the original crypto has shown remarkable resilience.
It did dip briefly below $60,000 last week. But that only triggered a buying frenzy. Clearly, the market is still confident in Bitcoin's long-term potential.
And this wasn’t a small surge in demand, either. In fact, outflows from exchanges reached the highest they’ve been since the bear market low in November 2022.
To me, that means any price dips linked to Middle Eastern tensions are likely to be short-lived as investors capitalize on perceived opportunities.
Indeed, despite six months of sideways action, Bitcoin remains the top-performing asset of the year, boasting a 51.6% year-to-date gain.
And its current bullish outlook is supported by a confluence of favorable factors, including …
- Anticipated interest rate cuts,
- Stimulus policies from China, and
- A surprisingly robust U.S. labor market.
These factors collectively contribute to a positive macroeconomic environment that benefits risk assets like Bitcoin.
But while keeping an eye on Bitcoin is important, there’s another sector that could start moving ahead of it.
Memecoins Lead the Surge
In this "super cycle" year, large memecoins often take the lead when the market shifts.
So it’s no wonder that one memecoin emerged as the top gainer among the top 100 cryptocurrencies, posting a 13% increase.
That would be dogwifhat (WIF, “D-”). It’s one of the top performing memecoins this cycle. And it’s built on the Solana (SOL, “B”) network, so it also benefits from Solana’s growth.
Meanwhile, Neiro (NEIRO, Not Yet Rated), currently ranked No. 123, has soared by impressive 50%. This was in in part driven by its recent partnership with the travel website Travala. This integration allows people to use this Ethereum (ETH, “A-”) based memecoin to book over 3 million hotels and flights worldwide.
As always, though, I want to note that memecoins are incredibly volatile and, as such, difficult to trade. While you should never invest more than you can afford to lose, I’d add extra caution to any memecoin position you may be interested in.
But the recent surge in sentiment shouldn’t be attributed to only Bitcoin’s resilience or the memecoins’ near-term price jumps.
Rather, there are three big reasons investors should be more bullish.
Bullish Reason 1: TradFi’s Embrace Is Getting Stronger
The influx of major financial players into the cryptocurrency space is a clear sign of increasing institutional interest and validation.
Notably, the $1.6 trillion fund, Franklin Templeton has filed for a BTC and ETH Index ETF with the SEC, signaling its bullish outlook on cryptocurrencies.
Additionally, the firm recently tokenized its money market fund, FOBXX, on the Aptos (APT, Not Yet Rated) blockchain. Remember, this is after BlackRock released its tokenized fund, the BlackRock USD Institutional Digital Liquidity Fund (BUIDL).
This reinforces that tokenization in traditional finance is a growing trend. One that allows fractional ownership of funds and assets where it was previously impossible.
Speaking of BlackRock, the leading player in tokenized funds has classified Bitcoin as a "risk-off" asset and a "Global Monetary Alternative." It believes this decentralized, non-sovereign asset can serve as a hedge against global instability and declining trust in traditional financial systems.
That’s nothing new to crypto enthusiasts. But it is heartening to hear Bitcoin’s core ethos repeated and supported by a TradFi giant.
Ethereum, on the other hand, is seen by BlackRock as a "bet on blockchain adoption," as it represents the essential infrastructure for a wide range of blockchain-based applications.
Meanwhile in Europe,global bank BBVA is leading the charge with plans to launch a Visa-backed stablecoin by 2025. This move highlights the growing acceptance of cryptocurrencies within the traditional financial sector and the potential for blockchain-based solutions to revolutionize cross-border payments and settlements.
Bullish Reason 2: Bitcoin’s Expanding Mining Landscape
Bitcoin mining is expanding, and analysts are becoming increasingly optimistic about the prospects of Bitcoin mining companies.
Macquarie has initiated "outperform" ratings on several mining stocks, recognizing their potential for diversification and growth in the AI compute market.
These companies don’t just focus on BTC production. Many are also actively acquiring Bitcoin.
Marathon Digital Holdings recently increased its holdings to 26,200 BTC, while Cathedra Bitcoin has also entered the market as a buyer.
This shows a growing confidence in the long-term value of the cryptocurrency.
And it’s not just companies. Countries are joining the fray as well.
Russia in particular has positioned itself as a significant player in Bitcoin mining. It has leveraged its surplus energy capacity in Siberia to power mining operations to reportedly produce 54,000 BTC in 2023. This contributed to over $550 million in taxes.
Even Putin boasted about it, which marks a significant shift from previous calls for a complete ban on cryptocurrencies in Russia.
Japan is also stepping up its mining efforts, with Agile Energy X Inc. investigating the potential of using surplus renewable energy.
Its simulations show that 50% of the total power supply would be wasted if green energy were to be introduced. The simulations also showed that using 10% of that power would allow $2.5 billion worth of BTC to be mined every year.
Bullish Reason 3: Favorable Regulatory Developments
The regulatory landscape for cryptocurrencies is evolving positively in various jurisdictions.
The UAE has exempted cryptocurrency transfers and conversions from value-added tax. This retroactive exemption, effective from Jan. 1, 2018, demonstrates the country's commitment to fostering a conducive environment for cryptocurrencies.
Japan is also taking steps to create a more favorable regulatory framework. The government is reviewing cryptocurrency regulations with the potential to introduce tax reductions and new investment products like cryptocurrency ETFs.
Finally, Taiwan has made significant progress on this front. It now allows professional investors to access foreign virtual asset ETFs. This move expands investment opportunities and signals a growing acceptance of cryptocurrencies within the country's financial markets.
Looking Ahead: Key Economic Indicators and Market Sentiment
Attention now will turn to the U.S.
The latest Consumer Price Index data is expected to be released this Thursday. Given the recent robust U.S. wage and employment data, this report will be critical in assessing inflation trends.
Expectations for Fed rate cuts have shifted from a 50-basis-point decrease to 25 bps decrease in just one week, with this week’s data likely influencing future projections.
As the U.S. election approaches, market dynamics could shift significantly, with expectations for larger gains if Republican candidate Donald Trump emerges victorious.
But it’s worth noting that even in the absence of elections and other significant catalysts, the fourth quarter has historically been a bullish period for Bitcoin.
Since 2013, Bitcoin has averaged a remarkable 21% return in October, with a median return of 21.20%. This impressive performance has led to October being affectionately dubbed "Uptober."
We’ll have to wait and see if this one meets the expectations.
And in the meantime, I will keep bringing you the timeliest updates each week so you can make the most of this market regardless.
Until next time,
Marija Matić
