Bitcoin's Sigh of Relief

Compass 119

The Black Swan Flew Away.

• A shocking event became the catalyst Bitcoin needed to break through its resistances—and break through it did. Last Saturday, as an immediate reaction on the heinous attack on former U.S. President and current presidential candidate Donald Trump, the crypto market—the only active market during those weekend hours—experienced a slight downturn. However, once it became clear that the attack had failed, Bitcoin gained the necessary momentum to challenge the $60K mark. It ultimately surpassed this level and began its ascent to $63K.

• Trump's renewed stance on Bitcoin has been highlighted in statements such as his claim that "the future of Bitcoin lies in the USA" and his promise to guarantee the right to self-custody if elected. Just a week ago, his attendance as a speaker at the Bitcoin Conference in Nashville, the most important event in the crypto industry, was confirmed. The strength of the reaction, not only from Bitcoin but from the market in general, has contrasted with an event that would typically have strengthened the dollar and caused a decline in indices like the S&P 500 and even more so in risk assets like the Nasdaq and, naturally, Bitcoin.

• The odds of Donald Trump winning the 2024 presidential election have surged to 70% on Polymarket, which crypto investors view positively, given that he is an openly pro-Bitcoin candidate. And now, the designation of JD Vance, the crypto-friendly senator from Ohio, as Trump's Vice Presidential pick in his presidential campaign adds even more positive sentiment to the crypto market. The November elections in the U.S. are a significant event on the macroeconomic calendar every four years. For the first time, the Bitcoin agenda and the crypto industry could play a fundamental role.

• Our key BTC speedometers show recovery towards a bullish environment, but bulls are not in the clear. Caution is more than warranted as we will explain in the Key Takeaways below.

Figure 1: Speedometers indicating the current state of BTC. Notice how, despite the remaining high-risk modality, the metrics have turned towards bullish across the board.

Strengthening fundamentals

• The stability in Inflows, coupled with the pronounced increase in the Market Value to Realized Value (MVRV) ratio and the Spent Output Profit Ratio (SOPR) indicate a cautious (see the uptick in outflows) yet optimistic repositioning of BTC.