(Kitco News) – It was a mixed day of trading for financial markets as Bitcoin (BTC) consolidated, stocks pumped and dumped, and gold hit a fresh all-time high. The upcoming U.S. presidential election was widely cited as the reason for the uptick in volatility, along with mixed economic data, which continues to make the Fed’s decision on interest rates a challenging one.
“Economic data presents a mixed picture: the U.S. GDP growth rate slowed to 2.8% annually in the third quarter, falling short of the 3% expectation,” noted analysts at Secure Digital Markets. “However, the labor market outperformed expectations, suggesting underlying economic strength.”
While the latest data did little to change expectations for a 25 basis point interest rate cut at the November FOMC meeting, investors remain on edge, sensing that we are just one or two positive economic reports away from the Fed holding rates steady after that.
At the closing bell, the S&P, Dow, and Nasdaq all finished in the red, down 0.33%, 0.22%, and 0.56%, respectively.
Spot gold rallied to a new all-time high of $2,790/oz during the morning session and has since experienced some slight selling. At the time of writing, the yellow metal trades at $2,785/oz for a gain of 0.37% on the session.
Data provided by TradingView shows that following Tuesday’s flirt with its all-time high, Bitcoin entered into consolidation, hitting a low of $71,418 near midday before experiencing a bounce higher.
BTC/USD Chart by TradingView
“Bitcoin recently approached its all-time high of approximately $73,800, which has significantly increased demand for ETFs, especially with the upcoming U.S. elections,” Secure Digital Markets analysts said. “Bitcoin's value has surged by nearly 75% this year. The launch of spot ETFs, new rounds of monetary easing by major economies, and the rising prospects of a win by crypto-friendly candidate Donald Trump have all been key growth drivers.”
On Tuesday, Bitcoin exchange-traded funds (ETFs) saw their busiest day in months, with the 12 spot bitcoin ETFs in the U.S. reporting total daily net inflows of $870 million, the largest since the first week of June.
“High ETF inflows reflect robust investor confidence, which can elevate prices in the short term due to prevailing supply and demand dynamics and heightened trader sentiment,” Secure Digital Markets analysts said. “Notably, large investors have begun locking in profits as Bitcoin nears peak prices, although the volume of realized profits has begun to decline since reaching its highest on October 8, indicating a potentially stabilizing market.”
“Trading volume surged to $4.75 billion, the highest since early August,” they added. “Blackrock's ETF, IBIT, surpassed $30 billion in assets, reaching this milestone significantly faster than the renowned gold ETF, GLD.”
ETFs are widely expected to continue seeing increased demand for the foreseeable future as more institutions gain exposure and Bitcoin’s post-halving rally ramps up.
At the time of writing, Bitcoin trades at $72,244, an increase of 0.23% on the 24-hour chart.
Bitcoin rally to kick into high gear following the election
One effect ETFs have had on the Bitcoin market is a decline in volatility compared to previous cycles, which analysts say highlights the digital asset sectors increased legitimacy.
“Volatility has been fairly low lately outside of BTC’s recent pump, with nothing much going on other than an orderly stepwise ascent of major U.S. indices on the backdrop of good economic data,” said market analyst Bloodgood. “This kind of environment can be very dangerous, however, since it’s easy to become complacent and stop thinking about risk management, which wouldn’t be the brightest thing to do given what we’ve got coming up in terms of headlines.”
“Volatility could pick up quite a bit given that the first week of November will bring both the U.S. elections on November 5 and, just two days later, the next Fed meeting,” he warned. “As of now, the odds seem to favor Trump for the presidency (but this will be less impactful if it’s paired with a split congress rather than a Red Sweep) and, overwhelmingly, a single 25 bps cut by the Fed.”
Looking at the weekly chart for Bitcoin, Bloodgood noted that “Bitcoin’s higher high leads to levels not seen since June.”
“At the time of writing, we are seeing a breakout from the huge weekly bull flag, which could result in a major move up if it holds,” he said. “Pay attention now, as I’ve seen people get rekt on moves like this too many times.”
Bloodgood provided three possible scenarios for how things will play out moving forward.
First, “This is the breakout, and we go up only,” he said. The second scenario is that “We get a retest of the breakout level.” The third option is, “This is a fake breakout, and we’re heading back to test $64.5k.”
“If you’re looking to enter in spot and potentially catch the new swing, it’s ideal to wait for the next weekly confirmation to be on the safe side (Note: given the upcoming elections, some volatility is expected),” he noted. “For short-term trading, you can try to catch a retest (Note: observe volume on the retest—if there’s no volume, chances are support won’t hold).”
“Given Bitcoin’s recent performance, it’s hardly surprising that the spot ETF flows are looking even better, with $870 million of net inflows yesterday, not too far from the all-time highest value of just over $1 billion in a day—a record that I won’t be surprised to see broken fairly soon,” Bloodgood said.
“As for what this means for the broader crypto market, a continued BTC pump could easily make BTC dominance spike up above 60%, providing a great foundation for some variant of the well-known cycle dynamic where BTC takes up all the capital, which eventually starts flowing into majors and then alts further out on the risk curve,” he concluded. “In other words, we could be in for a great ride, so stay vigilant and keep watching the charts.”
Brian Dixon, CEO of OTC Capital, also sees the potential for an extended rally in the near future, citing expectations of a Trump win and loosening monetary policies.
“This Bitcoin rally is likely a result of several factors in my opinion, including markets pricing in a Donald Trump victory. Both polls and betting markets are swinging hard in Trump’s favor, after all, and we’re seeing this also being reflected in actual price action,” Dixon said in a note to Kitco Crypto. “I should also note that the macroeconomic context globally is one of central banks turning towards monetary loosening, and I believe such loosening very much works in both the favor of Bitcoin and the broader crypto market.”
“A lot of the upward price action seems to have been front-run earlier this year because of the approval and launch of the Bitcoin ETFs, and this was followed by months and months of sideways action,” he noted. “Now, however, after a period of prolonged consolidation, I believe we may appear to be headed towards a major and sustained breakout.”
From a technical perspective, TradingView analyst Arman Shaban sees Bitcoin rising to $77,000 and beyond once it surpasses its all-time high.
“By analyzing the #Bitcoin chart in the weekly timeframe, we can see that after our last analysis, Bitcoin rose over 10%, climbing from $66,500 to $73,600, now within just $100 of its all-time high,” he said.
“Following this move, Bitcoin saw a slight correction down to $72,000, and I still expect the previous high to be broken soon, with Bitcoin reaching higher levels,” he added. “The next bullish targets are $77,000, $81,700, and $93,800.”
Altcoins correct alongside Bitcoin
Altcoins followed Bitcoin’s lead into consolidation, with a majority of tokens in the top 200 recording declines on Wednesday.
Daily cryptocurrency market performance. Source: Coin360
The top gainers on the day were Mask Network (MASK), Maker (MKR), and Chainlink (LINK), with increases of 13.9%, 9.8%, and 6.2%, respectively. Goatseus Maximus (GOAT) with the biggest loser, falling 14.5%, while Celestia (TIA) lost 9%, and Bittensor (TAO) fell 6.2%.
The overall cryptocurrency market cap now stands at $2.42 trillion, and Bitcoin’s dominance rate is 58.7%.
