October 30 REX Wire Market Outlook

It's been a rough week for the conventional markets, but bitcoin is a different story. As ever, we'll start with the traditionals, before moving on to take a look at the crypto world.

Dollar Bumps Against Ceiling

The DXY is still close to its local high of 107, which it hit four weeks ago. After such a strong run-up (almost three months of consecutive weekly rises), a correction could be expected. It has not yet materialized in any significant fashion. A drop below 105 might confirm that the dollar has topped, at least for now, but so far it remains stubbornly strong.

The culprit this time is likely the unexpectedly hot CPI print for September, up 0.4% MoM against the expected 0.3% (3.7% annualized vs 3.6% expected). It doesn't sound like much, but it's enough to spook markets that we're not done with inflation, which in turn will place more pressure on the Fed to raise interest rates, benefiting the dollar as a source of risk-free income.

The next FOMC meeting takes place on November 1. The market is strongly expecting a hold (96% confidence). Going into December and early 2024, traders are less certain and there's a reasonable chance of a further hike to 550-575 bps.

S&P Corrects

This continued strength has placed further pressure on the stock markets, which had already seen their traditional pre-election year August/September drop. The S&P 500 has fallen around 4% this month, putting it into "correction" territory (10% off the local high). Traders will be paying keen attention to Jay Powell's words after the Fed meets on Wednesday. Right now, the Halloween effect looks set to be muted.

Bitcoin Soars

It's been a different case for bitcoin, which has generally proven uniquely sensitive to dollar strength. Not so this month: Uptober has come through once again, after a shaky start.

It's now almost exactly a year since the November 2022 low, and BTC has put in a series of higher highs and higher lows. The latest move, on renewed ETF optimism, pushed it clean through the $30-32k resistance band in a single day, to an 18-month high of $35,000. It's currently trading comfortably above $34,000. A retest of $32,000 might be expected, but bears suddenly have reason to be cautious.

BTC completely ignored the dollar strength and the fears that have caused other markets to falter. One interesting insight is that gold appears to have done the same.

Despite having a reputation as the leading safe-haven asset, gold is also sensitive to the dollar. However, its recent path has been similar to that of bitcoin, strengthening through October and putting in a local high above $2,000.

We'll be looking more about this in a forthcoming article. For now, we'll simply note that bitcoin may be joining gold as one of the preferred store-of-wealth assets in troubled times.

Alts are a different story. BTC has sucked the oxygen out of the market, and almost all altcoins have lost value in BTC terms. There's some evidence, though, that the mini "alts winter" is coming to an end—though new moves higher from bitcoin might prompt another plunge.

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