Key Takeaways
Will strong third quarter earnings draw risk capital away from the crypto market?
Stocks are absorbing the flows for now, putting the crypto market and Bitcoin’s breakout on hold.
Can the market maintain its bullish tone amid macro volatility?
Sentiment remains positive, but price developments depend on how risky assets trade this week.
The race to raise capital from risky assets is on.
This week is marked by macroeconomic events, from possible rate cuts to the US-China meeting. Moreover, the big gains are about to fall, and we are already seeing solid inflows into US stocks.
The question now is whether this will divert risk capital away from the crypto market, limiting that of Bitcoin [BTC] move on to price discovery.
Everything that can move the markets will happen this week
Crypto will open on a volatile basis in November.
A prolonged US government shutdown – now lasting almost 30 days – has kept macro sentiment uneasy. Still, a “softer than expected” CPI print reversed the move to risk-on, sending traders back to stocks and digital assets.
As a result, positioning turns bullish ahead of the FOMC on October 29. What further fuels this move is that President Trump’s upcoming meeting with President Xi is causing investors to take even more risk.
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In short, the crypto market remains strong in the second half of the fourth quarter.
In support of this, the TOTAL crypto market has ripped off nearly 20% from post-crash lows, adding about $610 billion in less than three weeks. Notably, BTC accounted for 40% of these inflows, suggesting this rally is ‘market driven’.
That said, BTC’s path to price discovery still lacks structure.
With key macro news figures set to drop this week, risk appetite among investors is likely to change as traders react to new data. Against this backdrop, the question is: will investors continue to stay the course in crypto, or will they start to tone down risk?
Earnings season is testing the crypto market’s risk premium
Earnings season is officially underway.
Between October 27 and 31, mega-cap names (Microsoft, Google, Meta, Apple and Amazon) will cut their third-quarter earnings. Together, that’s about $15.2 trillion in market cap in one week.
It is striking that the flows have remained risky. Nasdaq is up 4.35% MTD, about 3.5x BTC’s gains.
In addition, the S&P500 has reached a market cap of more than $3 trillion since its October 10 low, making it one of the most profitable runs registered.
Source: TradingView (NASDAQ)
Simply put, US stocks continue to outperform crypto relatively.
Against this backdrop, strong third-quarter earnings are likely to keep money flowing into the stock, especially as investor sentiment shifts following this week’s headlines. A possible interest rate cut could stimulate this inflow even further.
That leaves the crypto market on the way to a key week.
Sentiment is still positive and BTC remains a good bid, but a breakout in price trend will depend on how broader risk assets trade. For now, capital seems more inclined to chase momentum in stocks than in crypto.