October Outlook: The Perfect Storm
The stars are again aligning as market fundamentals look increasingly favorable. BTC is entering its strongest seasonal period of the year, leaning heavily in favor of aggressive exposure. While my outlook is strong, we might be granted an additional accumulation week as October starts with an employment data bonanza and the Chinese holiday season.
The easing is quickly turning into a liquidity tsunami
The Federal Reserve officially initiated its cutting schedule last month, cutting 50bps and forecasting two additional cuts for the remainder of the year. The market promptly responded with relief, pushing higher as a Goldilocks soft landing scenario reigns likely. Still, in early October, we might see short-term weakened enthusiasm as a plethora of employment data is due to be released this week. Bitcoin’s current correlation regime with U.S. equities is at multi-year highs, and job figures are due to have a directional impact throughout the week, possibly softening momentum in the very near term. Following the U.S. cut, the People’s Bank of China followed suit aggressively, with multiple rate cuts and an enormous $140bn stimulus package. The message from the Chinese central bank is crystal clear: the government aims to avoid a recession and push its GDP growth back on track. This message has been promptly received by market players, pushing Chinese equities up 20% in five days. These measures strengthen global liquidity and represent another strong secular force to push BTC higher in Q4. However, alongside this week’s employment data bonanza, China enters a national holiday period from October 2 to October 8, potentially softening its positive impact on the market in the coming week. This further points toward BTC performance being anchored to employment data in the coming week. After this week, we anticipate less macro-dependent price action as the focus shifts toward fundamentally constructive factors.Fundamentals remain solid
In the September outlook, eight bullish factors were mentioned for Q4. As elaborated above, the policy pivot has already generated momentum, and China’s aggressive push is due to elevate global liquidity further. FTX payouts are also nearing, and as outlined in our September 10 report, we expect payouts to occur in late Q4 or early Q1, with roughly $2.5bn of payouts being used to repurchase crypto. We expect the focus to quickly move toward the U.S. election, where odds reign 50/50 between Trump and Harris. A Harris win will likely be met by a short-term negative crypto reaction, with the crypto market positioning for more of the status quo. A Trump victory is likely to be met with an all-gas, no-brakes reaction in the market due to Trump’s significant courting of the industry and an expected softer regulatory regime. While fundamentals are solid, sentiment reigns negative, with funding rates still hovering mostly below neutral terrain in a regime resembling the August-October 2023 environment. While past performance is not indicative of future results, past price patterns fit closely with the harmonic set of fundamentals ahead, with seasonality, trough-to-peak, and delayed halving effects all pointing toward tailwinds ahead. A new positive factor appears
Another fundamentally bullish development occurred in September with the SEC’s approval of IBIT options. We expect these options to lead to: a) a new wave of ETF inflows to accommodate demand for options exposure, b) short-term bullish micro-structure effect, expecting significant OTM call demand (steepened volatility smile) with increased near-term likelihood of gamma squeezes as delta-neutral market makers adjust hedged exposure based on speculative retail demand dynamically. In simplified terms, the options jargon above may be summarized to heightened BTC demand and a potential wave of forced buying of material size. The options bull story largely relies on retail excitement, but such an environment harmonizes well with other underlying solid factors, cementing my bullish thesis for the months ahead. With stars aligning, the time to be fully allocated is now
Global easing, improved global liquidity, upcoming ETF options, and FTX payouts are all parts of a fundamentally bullish backdrop as we enter BTC’s strongest seasonal period of the year. This strongly favors full allocation in BTC for the months to come.
