It has been quite the end of the month for the crypto industry. As of 4 p.m. in Hong Kong Tuesday, Bitcoin was trading above US$34,000, having jumped 26% for the month, according to data from CoinGecko. Ether was up 6.8% to flirt with the US$1,800 resistance level. A host of other altcoins are also on the rise.
The price pump arrived just in time to save Bitcoin’s ‘Uptober’ narrative — a widespread belief among crypto advocates that after the dog days of summer, when the digital asset market tends to suffer, a more favorable wind begins to blow from October. Buoyed by those autumnal tailwinds, the narrative goes, each year ends brightly for crypto.
While dismissed by many market analysts as a coincidence, there is some truth to the narrative. Data on Bitcoin — the world’s largest cryptocurrency which has a market capitalization comprising more than half of the entire crypto market — shows that October has only seen a negative end-of-month result for the coin once since 2015. That compares to the month of September, which has seen Bitcoin growth end the month in the negative six times over the same period.
“Crypto is fueled by narratives a lot of the time, and we’ve seen that historically,” said Clara Medalie, head of growth at market intelligence provider Kaiko. “Uptober,” Medalie added, “is like one of the many crypto narratives that are often used to explain price movements.”
While those narratives may stem from a desire among crypto traders — as with participants in all markets — to buy any sign that the arrow will go up on their investment, they often contain at least a kernel of truth. For this Uptober, that kernel of truth is tied to the very real and growing possibility that the U.S. Securities and Exchange Commission (SEC) could approve a spot Bitcoin exchange-traded fund (ETF).
Rumors that an approval could be imminent first began to emerge on Oct. 16, with the token range bound at US$28,000. Just over a week later on Oct. 24, the price broke through US$35,000 before settling down slightly to its current level.
“The October bounce we are seeing appears linked to just one catalyst: enthusiasm over a possible ETF approval,” Medalie said. “There are real signs that an ETF approval could be just around the corner, so I think the enthusiasm is not for nothing.”
A spot Bitcoin ETF is seen by many crypto advocates as something of a silver bullet for the industry. SEC boss Gary Gensler has confirmed that the regulator is currently considering “eight to 10” spot Bitcoin ETF applications from some of the world’s biggest investment names, including BlackRock and Cathy Woods’ Ark Invest.
Creation of one spot Bitcoin ETF would allow institutional level investors to trade Bitcoin on traditional exchanges. But the general consensus is that the SEC cannot approve just one. Rather, when one — most likely Blackrock’s — is approved, all the dominoes will fall, a number of approvals will be made, and institutional cash will flood into crypto.
Blockchain analytics firm CryptoQuant estimates that, should the SEC approve the applications made by the seven largest funds involved in the race, up to US$155 billion would pour into Bitcoin, swelling the wider crypto market by US$1 trillion.
Those inflows could barely arrive at a better time for the crypto industry. Eighteen months of scandal, failures and mass layoffs have seen US$2 trillion wiped off a once US$3 trillion crypto market. The hope therefore is that a spate of spot Bitcoin ETF approvals would go some way towards replacing those losses.
But it’s not a given that upward price action would have a galvanizing effect on other areas of the wider field of Web3 — a new phase on the internet built on decentralized blockchain technologies, non-fungible tokens (NFTs) and the metaverse. Those sectors are also heavily impacted by cryptocurrency price fluctuations and have suffered a significant loss of interest and funding throughout the crypto bull market, which began in May last year.
Yehudah Petscher, NFT market analyst at Forkast Labs, said that he had a “gut feeling” that the market is at “peak FOMO right now.” The fear-of-missing-out is driving purchases across crypto, with NFT prices currently at their highest in 16 weeks. But the buzz around the spot Bitcoin ETF news could just as quickly die down.
“November is probably going to be ugly, in my opinion,” Petscher said, pointing to the fact that Bitcoin has historically performed poorly in November, following the Uptober bounce — a potentially bad sign for other areas of Web3
But Hani Abuagla, a Dubai-based market analyst at online broker XTB, said that, at least for Bitcoin, the good times signposted by the October upswing could be here to stay. The SEC should approve four or five spot Bitcoin ETFs by the first quarter of 2024, he said, while the Bitcoin halving event — which increases the coin’s scarcity — is another major price catalyst to factor in. Added to that, the trial of Sam Bankman-Fried, founder of the failed cryptocurrency exchange FTX, has failed to impact the market as much as anticipated.
“I believe [the bear market] is over,” he said, adding that “the good news is coming more than the bad news.”
But are the current gains, fitting neatly as they do into the Uptober narrative, sustainable? Kaiko’s Medalie struck a more cautious tone.
“It remains too early to determine if this is a real turn-around. Markets will need more than just an ETF approval to correct course, as the entire industry has suffered some serious setbacks over the past year,” she said.