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Crypto Market Recap
October was a rollercoaster ride month for cryptocurrency watchers, as the prices of bitcoin have produced a 3208.9 USDT trading band last month over the OKEx trading platform. OKEx’s BTCUSD Index gained 11.37% in October, it was the first monthly gain since June and reversed the previous three consecutive monthly loss. The gain in price also led the BTC Market Dominance surged from 67.51% at the beginning of the month to over 68% before settled at 67.62% at the month-end.
In the altcoin space, prices have been even more fluctuate. We’ve seen the Total Ex-BTC Market Cap dropped to below USD 70 billion marks in the second half of October and rebounded to lower USD 82 billion handles before finishing the month at USD 80.46 billion. Mid-cap names such as NEO, TRX, and LINK were among top-performing altcoins last month.
China’s latest push in blockchain and its DECP project was the major fuel of the rally in October, markets believe that China’s embracement to blockchain could accelerate the mass adoption of the technology, which could be an underlying benefit for cryptocurrency overall. Although China’s DECP project could ultimately lead to the debate of state-backed blockchain vs. private blockchain, OKEx Perspectives expects that after China’s move, global central banks will adopt a more proactive approaches in terms of exploring the possibility of digitalizing their currencies, despite it’s too early to make conclusions on the benefits of central bank digital currency.
Looking ahead, we believe that the rally in the US equities markets will continue to drive the positive sentiment in the crypto space, read here for more about why equities markets matter to crypto. From a macro perspective, the US-China trade optimism, the lower chance of a no-deal Brexit, and the global easing environment could continue to extend the positive bias in cryptocurrency.
On the fundamental front, Ethereum watchers will probably focus on the upcoming Istanbul upgrade, which is reported will arrive as soon as the first week of December. Stellar is another focus, as the Stellar Development Foundation announced that it has burned over 55 billion XLM tokens.
BSV, TRX, BSV Led Gains; Altcoin’s Key Moment
Major altcoins were broadly in the green after bitcoin’s double-digit gains and China’s blockchain announcement. We’ve seen a massive 56% of gain in BSV and TRX drastically surged 38% in October. Other names like BSV, XRP, and LINK also outperformed BTC.
We would like to highlight the potential breakthrough in the altcoin space. In our previous publication < Bitcoin and Altcoin Post-Rally Trade>, OKEx Perspectives noted that bitcoin October rally has led altcoin prices to surge, and it could be the moment of truth on whether a real beginning of an “Altcoin Season”.
Figure 3 shows the total crypto ex-BTC market cap. We’ve seen an initial breakthrough of the altcoin market cap in late October and early November, and it jumped above its 365-day moving average. Previously, the altcoin market cap has made three attempts to break out from the downward channel, while it’s too early to call a real trend reversal, but the initial breakthrough should be a encourage news and all altcoin watchers won’t want to miss the development on the potential beginning of the real “Altcoin Season”.
Crypto News Highlight in October
- China was dominated in the headlines in the crypto space in October. President Xi Jinping said the country should accelerate the development in the blockchain. During a group study session of the CPC Central Committee Political Bureau, Xi highlighted the importance of emerging technology and how it could help industry transformation. At the same time, the country has passed a newly drafted cryptography law after Xi’s remark. The new laws aim to deal with new regulatory and legal disputes regarding the commercial application of cryptography applications.
- Facebook’s Libra hit the wall again as global regulators have raised additional concerns about its crypto project. The Financial Action Task Force (FATF) red-flagged that global stablecoins “could potentially lead to new risks regarding money laundering and terrorist financing”, and that could further deepen Libra’s regulatory challenges.
JP Morgan CEO Jamie Dimon also expressed his pessimism on Libra. He believes that Libra is not going to happen because it has lost many of its big backers like eBay and MasterCard, and the project doesn’t have any incentive comparing to his company’s JPM Coin.
On the other hand, Facebook hinted that the company could take a different approach on the Libra project. David Marcus, the head of the Libra project said Libra could use various fiat-based stablecoins, instead of the initially proposed token.
- Telegram’s token offering plan has hit the brakes. In mid-October, the Securities and Exchange Commission in the US filed an emergency action and obtained a temporary restraining order against the company and a related entity regarding the initial coin offering, saying that the company have failed to provide investors with information regarding to Telegram’s business operations, financial condition and risk factors that the securities laws require. In response, the company said investors have agreed to extend the deadline for the token launch to 30 April 2020.
- Bakkt is set to roll out a crypto consumer app after its physically-settled bitcoin futures booked a record turnover. On 25 October, the exchange announced that there was a record of 1179 contracts were traded on that day. At the same time, the new app will focus on consumer payment, digital asset portfolio. Users will able to store, transact, trade or transfer their digital assets.
- The Nasdaq Stock Exchange has listed a new index that allows Wall Street traders to track the performance of the top 100 cryptocurrencies. The CIX100 Index is powered by artificial intelligence which scans through data from over 1800 tokens and picks the top 100 coins and tokens with real volume and avoids possible market manipulation.
Bitcoin: Risk-on Mode is Turning On
The prices of bitcoin reversed its three consecutive monthly losses in October and rebounded more than 11%, and that makes the quarterly return of leading cryptocurrency solidly in the green of about 15%, and the October rally also sent bitcoin’s YTD return to almost 150%, outshined other major asset classes.
Bitcoin has shown an increased correlation with the SPX, while the correlation with gold has slightly dropped. This could be another evidence that bitcoin could be shifting from its risk-off mode to more like a risk-on asset, and that’s largely due to the rising risk appetite in the equities markets.
It’s also worth noting that bitcoin’s volatility has picked up alongside the prices surge. In general, a higher volatility environment usually discourages HODL activities and increases the appetite of short-term/day trading.
ETH & DASH: Increased Correlation with BTC; DOGE & BCH Lowered
In a 90-day time frame, ETH and DASH were among the most BTC-related altcoins last month. Their correlations with the leading crypto have rebounded to the upper +0.7 levels. It’s worth noting that DOGE, XRP and BCH’s correlations with BTC have a significant decrease in October, where BTC-XRP correlation has dropped to below 0.5 in the middle of the month.
Price-wise, altcoins with lower BTC correlation generally outperformed those with higher BTC correlation. For example, XRP (lower BTC correlation) gained 15.22% in October, while DASH (higher BTC correlation) only added 2.15%.
Bitcoin November Outlook
Market sentiment remains largely positive after China’s blockchain announcement, and this is likely to be carried into early November trading. As we start to prepare the year-end, we could expect to see more profit-taking activities in the markets, and this could somewhat limit the upside bias of cryptocurrencies. Also, we expect to see lower market volatility in November till the year-end, as traders and investors will probably focus more on holding BTC yearly gains rather than having more short-term price actions like what we saw in October.
OKEx’s BTC Long/Short Ratio suggests that bias was slightly toward the downside despite the largely positive sentiment. This could indicate that BTC prices could continue to consolidate at current levels, or traders have been taking a wait-and-see approach after the October rally.
Chart-wise, the October rally has sent bitcoin back above its 10-week moving average, it has been narrowly trading between the 10 and 20-week moving averages. OKEx Technicals believes that BTC will still mostly positive as long as it stays above the July-October downward channel (blue line). Meanwhile, the Bollinger Bands remain relatively wide even after the rally, this indicates that medium-term volatility could continue at a low level. In the short term, the psychological 10000 levels could still be possible, but there’s little evidence of anything beyond that point for now.
Altcoin Strategy: XRPUSDT
At the beginning of this article, we’ve explained the Total Ex-BTC Crypto Market Cap could be in producing a breakout and it could be a key moment for altcoins. Since that, some of the major altcoins are set to retest their long term resistance levels, and XRP could be one of them. Figure 10 shows the daily chart of XRPUSDT, the green line above has been a key resistance since April 2018. The pair has changed hand in the 0.3 levels after briefly touched the 0.25 area with massive volume. It has formed an ascending triangle pattern (blue lines), and it could produce a bullish breakout in the near term.
Also, the Ultimate Oscillator indicates that a positive momentum breakout has initially occurred, and that should increase the possibility of having a positive price breakout.
Future Macro Events to Watch
- November 1: Finland’s Financial Supervisory Authority has granted registration to five crypto service providers to operate in the country. Finland has passed the Act on virtual currency providers (572/2019) in May and said the law complies with EU’s anti-money laundering legislation.
- November 7: Ripple’s 2019 Swell conference in Singapore. While the crypto community focuses on the latest development plans for the company, the prices of XRP spiked just before Ripple’s Swell conference in 2018, it’s interesting to see if that will be repeated this year.
- November 8: European finance ministers are expected to discuss how to respond to challenges brought by Facebook’s Libra. Various media reported that the EU remains open to the possibility of banning ‘global’ stablecoins that could create “excessive risks”.
- November 18: MakerDAO Foundation is set to launch a new version of its stablecoin DAI at the Devcon Ethereum Developer Conference in Osaka, Japan.
- November 19 (tentative): The Supreme Court of India will resume hearing the arguments against the crypto banking restrictions by the Reserve Bank of India.
- November 21: US Fed FOMC October meeting minutes. The Fed slashed the fed funds rate to 1.5–1.75 percent during its October meeting, the third rate cut so far this year. The central bank signaled a pause in easing cycle as the previous reference that it “will act as appropriate” to sustain the economic expansion was removed from the policy statement.
- November (timing unknown): Bitcoin mining machine manufacturer Canaan Creative’s US listing is set to go, and the first public trade of its share could start in November.
Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involves significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.
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