Exploring the ‘Uptober’ drivers and current outlook

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The ‘Uptober’ outlook, 4 days in

It’s the fourth day of October, which crypto folk sometimes call “Uptober” due to the gains bitcoin has historically seen during the month.

With that in mind, let’s quickly look at where we stand and whether that market narrative could hold.

The upshot? Well, XBTO chief commercial officer Javier Rodriguez-Alarcon told Blockworks that the upcoming US elections, uncertainty around the Fed’s rate path and an escalating conflict in the Middle East could lead to significant disruptions.

“We believe these factors will impact crypto markets, leaving little room for typical seasonality effects to play out this year,” he added.

While we haven’t seen any extreme BTC price moves in October yet (at least not on a net basis), bitcoin rose to nearly $62,000 after this morning’s jobs print.

BTC fluctuated from there, ending up back around $61,980 at 2 pm ET — up 2% from 24 hours prior.

Today’s US Bureau of Labor Statistics Report showed that nonfarm payroll employment jumped by 254,000 in September (up from a revised 159,000 in August). The unemployment rate, at 4.1%, was lower than the 4.2% expectation.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, noted the Fed’s concerns about the jobs market potentially cooling off rapidly. That led to the US central bank’s 50-basis point cut last month.

“These latest numbers will help assuage those worries and add to a picture of a resilient US economy, which appears to be heading for a soft landing,” Streeter added in a statement this morning.

Forward Guidance’s own Felix Jauvin, who shared a jobs report primer yesterday, weighed in on X after the release:

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Taking a step back, the so-called “Uptober” began with a downward market reaction to an Iranian missile attack on Israel. That came after Israel launched a ground operation into Lebanon.

Bitcoin dropped to roughly $60,000 on Oct. 1. US spot bitcoin ETFs saw net outflows of $243 million that day, Farside Investors data shows — the largest in a single day in nearly a month.

Industry watchers noted that the risk of further escalation in the Middle East could make markets more sensitive to short-term developments as traders reprice risk.

“While the first half of October could see declines of 8 to 10%, we still expect the month to end neutral to positive, depending on when the uncertainty regarding geopolitical conditions alleviates,” Bitfinex derivatives head Jag Kooner said in a statement.

Some crypto segment observers have pointed out that a slow start to October (from a crypto price perspective) has not necessarily been a signal of how the month would end.

CoinGlass data shows, for example, a roughly 10% BTC price gain on Oct. 22, 2023 after mild fluctuations earlier that month.

We should also probably mention the elephant in the room: There’s a presidential election in 32 days.

Research published this week by crypto platform XBTO shows that bitcoin’s volatility is much more correlated to TradFi markets now than it was during the 2016 and 2020 election cycles.

There has been a +86% correlation between BTC and the S&P 500 this year, the Thursday report noted. That compares to -39% in 2020 and +36% in 2016.

Donald Trump and Kamala Harris have both made pro-crypto comments, though we (obviously) won’t know specific actions they will actually take until later on.

“As the election draws nearer, market participants should brace for continued volatility, driven by the unpredictable nature of the election outcome and its potential impact on future crypto policies,” Rodriguez-Alarcon said.

So what should we make of all this? Put simply, today’s stronger-than-expected job numbers appear to have fueled optimism that will likely remain tempered by various wait-and-see factors.

I imagine when you started reading this you knew there would be no definitive answers to whether the “Uptober” narrative would hold this time around. But hopefully you have gained some perspective on what to watch for nonetheless.

— Ben Strack

$92 million

The capital bitcoin miner TeraWulf gained by selling its 25% equity interest in the Nautilus Cryptomine joint venture to Talen Energy Corporation.

Most of that (about $85 million) is cash. TeraWulf intends to use the money to expand its high-performance computing (HPC) and AI capabilities at its Lake Mariner facility in western New York.

This continues the trend of bitcoin miners wading deeper into the HPC/AI space to expand their revenue streams, particularly after per-block bitcoin mining rewards were slashed in half earlier this year.

Did You Notice

Happy Friday! We have made it to the end of jobs week. Odds of a 25bps rate cut by the Federal Reserve next month sat at 97.4% (as of 2 pm ET), according to data from CME Group. This is up from about 47% a week ago.

We already discussed today’s jobs report. Here’s a look at some of the other data that has fed fund futures markets rethinking things:

• Tuesday’s JOLTS report — a metric favorite for Fed Chair Jerome Powell, by the way — showed job openings are increasing and workers are quitting at the lowest level since the pandemic. Still, quits didn’t have to drop too low to hit this new record; the figure came in at 3.1 million in August vs. 3.2 million in July. Job openings as a percentage of the overall labor force now sit at 4.77%, which is around pre-pandemic levels.
• In somewhat better news, on Wednesday the ADP employment report showed that the private sector added 143,000 jobs in September, up from 103,000 in August and beating the consensus expectation of 128,000. Wage growth is also slowing, another positive Powell wants to see. Twelve-month wage increases (for those who stayed in their same positions) was 4.7%, down from 4.8% in August. Powell is going to ultimately want to see annual wage growth closer to the 3% to 3.5% level, which he’s said in the past is consistent with a 2% inflation rate. But it’s a step in the right direction.
• And, for the not-so-good news: Initial jobless claims showed that 225,000 people filed for first-time benefits the week ended Sept. 28, up from the revised figure of 219,000 the week prior and higher than the expected 220,000. Continued claims, which are reported on a one-week delay, came in at 1.826 million for the week ended Sept. 21, a mild decrease from the week prior.

— Casey Wagner

Tokenization headlines keep on coming

As tokenization efforts continue to come up, let’s dig into the latest.

You may have seen Visa created a platform to help financial institutions issue fiat-backed tokens and test out their use cases.

As more real-world assets — from real estate to debt securities — come onto blockchains, there’s a growing need to bring more forms of cash onto those rails to trade them, Visa crypto head Cuy Sheffield told Blockworks.

We learned that Spain-based bank BBVA has been testing the issuance, transfer and redemption of a bank token on a testnet blockchain this year via the Visa Tokenized Asset Platform (VTAP) sandbox. BBVA seeks to launch a pilot with select customers in 2025 on the Ethereum blockchain.

Also this week, crypto infrastructure platform Taurus revealed it had partnered with Chainlink Labs “to accelerate the adoption of tokenized assets by global financial institutions.”

Taurus is integrating Chainlink data feeds for market pricing, reference and identity data, as well as the blockchain’s proof-of-reserve monitoring and interoperability protocol. The latter tool is set to allow for tokenized asset transfers across public and private blockchains, Taurus notes.

Backed by Credit Suisse and Deutsche Bank, Taurus signaled earlier this year it would focus on its custody and tokenization platforms given the growing momentum around bringing RWAs onchain.

Major TradFi players — like BlackRock, Franklin Templeton and State Street — are embracing blockchain tech as they recognize the benefits (lower costs, faster transactions and improved transparency), Taurus co-founder Lamine Brahimi told Blockworks.

“Ultimately, we’re witnessing an evolution of capital markets where digital assets will become an integral part of our financial systems, expanding opportunities for both institutions and individual investors,” he added.

We’ve heard about some of the bullish projections for how big this space can get. Tokenized money market funds by BlackRock and Franklin Templeton have roughly $1 billion in combined assets.

Tokenization’s full potential is expected to unfold gradually as the regulatory landscape evolves and technological hurdles are addressed, Brahimi said.

“In the coming years, I envision a world where tokenization is the norm across various asset classes like equities, debt and more,” he noted. “This will not only enable fractional ownership but also unlock liquidity in tightly constrained markets.”

I’ll be moderating a panel at Permissionless III next week — “The Mission to Tokenize $1T Onchain” — with panelists from Franklin Templeton, JPMorgan’s Onyx Digital Assets, Securitize and Kinto.

I’m expecting to learn a lot about how they see the space progressing.

— Ben Strack

Bulletin Board

• Crypto-focused asset manager Bitwise said Friday that it wants to convert its three futures-based ETFs to funds that rotate between 100% exposure to crypto futures contracts and 100% exposure to US Treasurys, based on market trends. This intended switch comes as the US spot bitcoin and ether ETFs launched earlier this year made futures-based ETFs “less compelling for investors seeking long-only exposure.”
• The spot BTC funds listed on US exchanges notched a third straight day of net outflows Thursday, bringing the three-day total to about $360 million. On Wednesday, the iShares Bitcoin Trust (IBIT) saw net outflows (of about $14 million) for just the fourth time since its Jan. 11 launch.
• We’ve already mentioned Blockworks’ Permissionless III in Salt Lake City, but we’ll remind you again. If you come, you can meet the Forward Guidance newsletter crew. Hope you have a great weekend!

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