Quarterly 3Q 2023 Investment Guide: Bitcoin Insights

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It looks like bitcoin has a good setup for the new quarter, with major institutions signaling confidence in both the future of crypto and even its US regulators at the end of the month. Don’t get too carried away though crypto is still part of the larger market, which remains in a challenging macro environment. The third quarter is historically the weakest for bitcoin. The average third quarter gain dating back to 2014 is just 4.67%, according to CoinGecko, and it has only had a positive third quarter for four out of nine in its lifetime. Before the recent rush of apps to launch spot US bitcoin ETFs injected fresh optimism into the crypto market, it was a frustrating second quarter for traders. Between the end of the banking crisis in May and the filing of the BlackRock bitcoin ETF on June 15, regulatory pressure weighed heavily on sentiment and bitcoin traded sideways. This lull could return over the next three months as industry drivers struggle against macro factors. “It’s clear that [the Fed] isn’t quite comfortable with the direction of the headline inflation numbers yet,” Christopher Ferraro, president and chief investment officer of Galaxy Digital, told CNBC. Even a rate cut.” The Federal Reserve left interest rates unchanged at the end of its June meeting, but said two more could come later this year. Some on Wall Street expect the Fed to move in July and September. Powell said the FOMC hasn’t decided whether a further hike is likely to take place in July. Does it shrink? Are we headed for recession, are we?” Ferraro added. “It’s a very uncertain macroeconomic environment, which won’t make a one-way move for any asset class, talk about bitcoin,” said Elliot Han of Cantor Fitzgerald as bitcoin finally recovered the $30,000 level, he failed to hold it for several weeks as macroeconomic challenges “currently dampen the rise in crypto.” The rush to get a bitcoin spot ETF approved came at the height of the Securities and Exchange Commissions hostility to crypto and many hopeful institutions like BlackRock, Fidelity and Invesco who filed a bitcoin ETF with Galaxy in June may force some changes, however it could take some time.”From a timing perspective, I think it’s largely unknown” when a decision on an ETF might come, said Ferraro. “But all of these institutions have real concerted efforts and probably wouldn’t put the effort into motion now if there wasn’t a strong belief that the market and regulators, especially the SEC, were ready to license regulated products. .” “Given all of the regulatory uncertainty and ongoing court cases, this is actually an opportune time for regulators to allow regulated products into the market and help address some concerns or lack of clarity,” he said. The rest of the world While this uncertainty persists in the United States, other parts of the world are adopting a friendlier attitude towards the industry. UK regulators have developed a “Regulatory Sandbox” to allow companies industry to test new innovations, mainland Europe has an established market of exchange-traded products for crypto, and Hong Kong has made clear its desire to become a crypto hub for the world.” It There is still a disparity in the treatment of crypto in the US and the rest of the world,” Han said. “The question is, will the US follow or continue its contentious approach? There is a growing number of American businesses that are no longer willing to wait for regulatory clarity as the price of bitcoin rises, he added, and many expect a big price spike in the spring that they won’t want to miss. BTC.CM= YTD Mountain Bitcoin is up over 80% year-to-date “Some are looking to move their headquarters, or at least establish large offices, to crypto-friendly jurisdictions,” added Han. “One US crypto company we know of is even seriously considering listing in London or Hong Kong and we’re also seeing more and more US crypto companies looking to build offshore offerings” like Ripple and Coinbase. While Ferraro and others remain optimistic about the future of crypto and aren’t worried that regulators will eventually find a proper path for US crypto firms, it could end up being too little too late. “I’m optimistic we’ll be successful,” Ferraro said. “I’m afraid the United States is taking its time and while that’s happening, sticky capital and sticky intellectual capital is building elsewhere in the world, and then it’s hard to unravel.”

Representations of the Bitcoin cryptocurrency are seen in this illustration, August 10, 2022. REUTERS/Dado Ruvic/Illustration

Dice Ruvic | Reuters

It looks like bitcoin has a good setup for the new quarter, with major institutions signaling confidence in both the future of crypto and even its US regulators at the end of the month. Don’t get too carried away though crypto is still part of the larger market, which remains in a challenging macro environment.

The third quarter is historically the weakest for bitcoin. The average third quarter gain dating back to 2014 is just 4.67%, according to CoinGecko, and it has only had a positive third quarter for four out of nine in its lifetime.

Before the recent rush of apps to launch spot US bitcoin ETFs injected fresh optimism into the crypto market, it was a frustrating second quarter for traders. Between the end of the banking crisis in May and the filing of the BlackRock bitcoin ETF on June 15, regulatory pressure weighed heavily on sentiment and bitcoin traded sideways. This lull could return over the next three months as industry drivers struggle against macro factors.

“It’s clear that [the Fed] isn’t quite comfortable with the direction of the headline inflation numbers yet,” Christopher Ferraro, president and chief investment officer of Galaxy Digital, told CNBC. Even a rate cut.”

Historical quarterly bitcoin performance since Q4 2013 Q1 Q2 Q3 Q4 Average return6.88%36.47%4.67%93.38%Number of positive periods4 out of 106 out of 94 out of 96 out of 10

Source: CoinGecko

The Federal Reserve left interest rates unchanged at the end of its June meeting, but said two more could come later this year. Some on Wall Street expect the Fed to move in July and September. Powell said the FOMC hasn’t decided whether a further hike is likely to take place in July.

“You see disparate and sometimes orthogonal data points coming out every day, is the economy growing? Is it contracting? Are we heading into recession, aren’t we?” Ferraro added. “It’s a very uncertain macro environment, which won’t make a one-way move for any asset class, let alone bitcoin.”

Cantor Fitzgerald’s Elliot Han said that although bitcoin eventually recovered the $30,000 level, it failed to sustain it for several weeks as macro challenges are “currently dampening the crypto’s upside.”

Regulation and ETFs

Beyond the macro backdrop, it’s clear that developments in US regulation and ETF demands will continue to be key themes in the third quarter. The rush of efforts to gain approval for a cash bitcoin ETF came at the height of the Securities and Exchange Commissions’ hostility to the crypto and many hopeful institutions like BlackRock, Fidelity and Invesco who filed a Bitcoin ETF with Galaxy in June may force a change. It might take a while, though.

“From a timing perspective, I think it’s largely unknown” when a decision on an ETF might come, Ferraro said. “But all of these institutions have real concerted efforts and probably wouldn’t have put the effort into motion now if there wasn’t a strong belief that the market and regulators, especially the SEC, were prepared to allow regulated products.

“Given all the regulatory uncertainty and ongoing court cases, this is actually an opportune time for regulators to allow regulated products into the market and help address some concerns or lack of clarity,” he added.

The rest of the world

While this uncertainty persists in the United States, other parts of the world are adopting a friendlier attitude toward the industry. UK regulators have developed a “Regulatory Sandbox” to allow crypto companies to test new innovations, mainland Europe has an established exchange-traded products market for crypto, and Hong Kong has made clear its desire to become a crypto hub for the world. .

“There is still a disparity in the treatment of crypto in the US and the rest of the world,” Han said. “The question is whether the United States will follow or continue its contentious approach?

There is a growing number of American businesses that are no longer willing to wait for regulatory clarity as the price of bitcoin rises, he added, and many expect a big price spike in the spring that they won’t want to miss.

Stock chart icon Stock chart icon

Bitcoin is up over 80% since the start of the year

“Some are looking to move their headquarters, or at least establish large offices, to crypto-friendly jurisdictions,” Han added. “One US crypto company we know of is even seriously considering listing in London or Hong Kong and we’re also seeing more and more US crypto companies looking to build offshore offerings” like Ripple and Coinbase.

While Ferraro and others remain optimistic about the future of crypto and aren’t worried that regulators will eventually find a proper path for US crypto firms, it could end up being too little too late.

“I’m optimistic we’ll be successful,” Ferraro said. “I’m afraid the United States is taking its time and while that’s happening, sticky capital and sticky intellectual capital is building up elsewhere in the world, and then it’s hard to unravel.”

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