Cryptocurrency investors are rejoicing as bitcoin (BTC) prices soared to $35,000, pushing the overall crypto market up a substantial 9%. The much-anticipated “Uptober” appears to be in full swing for crypto investors, especially given the recent positive momentum in the U.S. macroeconomy, which is expected to have a favorable impact on the cryptocurrency market. Read on below for a comprehensive market analysis.
The Pintu trading team has gathered critical information and analyzed the general economic situation and the crypto market’s movements over the past week. However, it should be noted that all information in this Market Analysis is intended for educational purposes, not as financial advice.
This week’s market analysis begins with a focus on the growth of economic activity in the private sector of the United States (US), highlighting several key points:
With the moderate uptrend in economic activity, the market is optimistic about the potential for a soft landing for the US economy. This sentiment persists despite rising geopolitical concerns and domestic political tensions.
Another improvement was seen in new home sales in September, which showed a significant increase of 12.3% to a seasonally adjusted annual rate of 759,000. This is a significant increase from the revised 676,000 rate recorded in August, as reported jointly by the U.S. Department of Housing and Urban Development and the Census Bureau. This increase is particularly notable given that mortgage interest rates are above 7%.
These numbers represent the fastest pace of sales since February 2022, beating the 680,000 sales rate that analysts were expecting.
From an economic standpoint, the U.S. economy continues to grow, according to the Bureau of Economic Analysis (BEA). In the third quarter, the U.S. economy expanded by 4.9%, exceeding economists’ forecasts of 4.3%. This expansion marked a significant increase from the 2.1% growth rate in the second quarter.
Excluding the years affected by the pandemic, this growth rate is the highest since 2014. In fact, these figures are double the growth rate observed in the first half of 2023.
Gross domestic product (GDP) growth was also better than expected, mainly due to a 4% increase in real consumer spending from July to September. Consumer spending alone contributed 2.69% to the final GDP figure.
In addition, robust government spending at the federal, state and local levels played a critical role in the strong GDP performance:
In total, government spending at all three levels contributed 1.5% to the overall growth rate. The BEA data indicate that the acceleration in real GDP was the result of an increase in private inventory investment, a surge in exports, and an increase in residential fixed investment.
In addition, personal consumption expenditures (PCE) prices rose from 2.5% to 2.9%, while core PCE, which excludes the volatile energy and food components, fell to 2.4%, better than the 3.7% expected in the prior quarter.
Concurrent with the GDP release on October 26th, the Census Bureau released two reports: durable goods orders rose 4.7% in September, beating the consensus estimate of 1.7%. Second, the trade deficit widened to $85.78 billion last month, according to the Census Bureau’s initial estimate.
On the financial front, the U.S. market partially recovered in pre-market trading on October 26, with major benchmark indices posting losses of up to 0.6%.
Bond yields were broadly lower, with the 10-year yield falling nearly 3 basis points to around 4.925 percent. The 2-year yield fell 2.5 basis points to below 5.1%, and the 30-year yield fell more than 2 basis points to below 5.07%.
The U.S. Dollar Index (DXY), which measures the greenback against a basket of currencies, rose 0.2% to 106.82.
Turning to the unemployment claims data, the Department of Labor reported last week that jobless claims rose by 10,000 to 210,000 for the week ending October 21st. It is important to note that the prior week had seen the lowest level of jobless claims in eight months.
The low level of jobless claims indicates that employment conditions remain strong, which may signal that economic growth will not slow in the fourth quarter. Therefore, the Federal Reserve may need to consider further interest rate hikes.
The low level of jobless claims suggests a lack of layoffs. Conversely, a continued rise in claims could indicate a potential slowdown in hiring.
BTC rose 13% over the week to $35K, surpassing multiple critical technical and on-chain price levels that were clustered around $28,000. This development is a noteworthy demonstration of strength. The total crypto market rose 9% to 1.26 Trillion USD this week.
The move was influenced by activity in the derivatives markets, including two short squeezes that led to the liquidation of 60,000 BTC worth of futures positions, along with a significant increase of $4.3 billion in open interest for options calls.
Profit seekers in the BTC market seized the opportunity to lock in recent gains on Wednesday, causing the cryptocurrency to retreat from its recent peak above $35K. This decline occurred in anticipation of the Fed Chair upcoming speech.
Long-term investors appear unfazed by the price fluctuations seen this week. The supply held by long-term holders has reached new all-time highs, and the levels of revived supply volumes remain inconsequential.
The current support level for BTC is at the psychological level of $30,000, with resistance at $34,000.
Last week, ETH surpassed the $1,730 mark, putting more than 61% of holders in a profitable position. With the market maintaining a positive sentiment, ETH holders showed no tendency to engage in massive selling activity. In addition, open interest increased, indicating traders’ willingness to navigate the increased market volatility. This metric experienced a rapid increase of $400 million in just a few hours, reaching a current total of $5.7 billion.
However, it’s important to note that any bad news could trigger a massive liquidation, especially as ETH whales have shown little interest as ETH has failed to break above $1,860. Indicators showed a significant drop of $2.5 billion in whale transfers last week. In addition, since October 23rd, the exchange’s net flow has shifted positively, reflecting a significant increase in deposits to exchanges compared to withdrawals. This could indicate further potential volatility.
It is important for investors to closely monitor the performance details of ETH vs. BTC. This performance comparison has reached its lowest point since April 2021, when BTC reached its early peak in the previous bull market at $65,000. If ETH continues to trade below this level, it is likely that it will underperform BTC.