This potential price rise is being fueled by a combination of factors, including a steepening in the U.S. Treasury yield curve, renewed market interest in spot bitcoin exchange-traded funds, and the rising odds of a Donald Trump victory in the upcoming U.S. presidential election, Kendrick added.
"For bitcoin the combined factors mean a bleed up towards the all-time high of $73,800 looks likely pre-election," the Standard Chartered Global Head of Digital Assets Research said in a note on Tuesday.
Kendrick observed that bitcoin and other digital assets have "finally started to rise" in response to the steepening of the 2s10s yield curve (the difference between the 2-year and 10-year U.S. Treasury yields), a shift triggered by stronger-than-expected U.S. CPI data released on Thursday. The shift in the yield curve signals increasing market volatility and anticipation of potential interest rate hikes, which often drives demand for alternative assets like bitcoin.
Kendrick also highlighted that Donald Trump's odds of winning have risen to 56.3%, according to the Polymarket prediction platform, which could be a significant factor driving upward momentum in bitcoin with only three weeks remaining before the U.S. election.
The probability of a Republican sweep — a scenario in which Trump wins and the Republican party controls both the Senate and the House — stands at 39%. "In conditional probability terms, if Trump wins, there is a 70% chance of a Republican sweep, which could create favorable conditions for risk assets, including bitcoin," Kendrick explained.
Kendrick also highlighted the role of recent inflows into spot bitcoin ETFs and increased activity in the derivatives market as key factors driving bitcoin’s upward trajectory. According to data from SoSoValue, U.S. spot bitcoin ETFs saw their largest single-day net inflows since June, with a total of $555.8 million on Monday. Out of 12 spot bitcoin ETFs, 10 recorded net inflows, while none experienced net outflows.
On the options front, the Standard Chartered analyst pointed to increased activity around bitcoin call options at the $80,000 strike price for December 27 expiry on the Deribit crypto derivatives exchange. "Another 1,500 bitcoin was added to the open interest of the $80,000 call in the past week," he said, suggesting that institutional investors are positioning for a significant move upward in the medium term.
Kendrick also discussed the rising net asset value multiple of MicroStrategy’s stock relative to bitcoin’s price. MicroStrategy, which holds over 252,000 bitcoin, has seen its stock price outperform bitcoin in recent weeks, with its NAV multiple reaching its highest level in three years. This divergence could be linked to increased confidence in MicroStrategy’s evolving role in the digital asset space, Kendrick suggested.
The Standard Chartered analyst said that one factor driving the rise in MicroStrategy’s stock value could be the Sept. 16 announcement that BNY Mellon was granted an exemption to SAB 121, a U.S. accounting rule that governs how companies hold and report digital assets. Kendrick explained that this exemption may allow MicroStrategy to engage in bitcoin lending activities, opening up new revenue streams for the company. "This creates the potential for new counterparts for MSTR to lend its bitcoin thus earning yields on the 252,000 bitcoin it holds, and that MSTR’s plan to become 'a bitcoin bank in the core business of creating bitcoin capital market instruments across equity, convertibles, fixed income and preferred shares' has become more apparent," Kendrick added.
As the digital asset ecosystem becomes more integrated into traditional financial markets, both MicroStrategy and spot bitcoin ETFs are poised to benefit from increasing institutional interest, Kendrick said. He emphasized that this growing legitimacy, along with favorable political developments, could provide a tailwind for bitcoin and other digital assets in the months ahead. He added that even if Trump doesn’t win, "the broader trend towards digital asset adoption remains intact."
Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.
© 2024 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
