The Scoop: Historically bullish 'Uptober' has arrived

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The Block2024/09/30 16:00

By:The Block

Quick Take Uptober is upon us. But you wouldn’t be able to tell from the price of bitcoin today. This column is adapted from The Scoop newsletter.

This column was co-written by Frank Chaparro, director of special projects at The Block, and Laura Vidiella of MNNC Group. The views expressed in this column are their own and do not reflect the opinions of their employers.

Ladies and gentlemen, Uptober is upon us. But you wouldn't be able to tell from the price of bitcoin today.

Things should be more bullish. Following the Federal Reserve's rate cut, there was a bit of a resurgence of "animal spirits" in memecoin-land, with a variety of nonsensical coins rallying. After weeks of stagnation, spot Bitcoin ETF flows surged, with over $400 million in inflows on Sept. 27. Perpetual funding is also strong, as highlighted by QCP in their market analysis on Tuesday. Historically, bitcoin gains an average of 22.9% in October.

I wonder if this is partly due to October hitting a sweet spot for market announcements—summer is behind us, and the holiday "silly season" is still a few months away. Already, we’ve seen several announcements signaling greater adoption of crypto markets. First, PayPal announced merchants can now buy, hold, and sell cryptocurrencies. PayPal has allowed consumer customers to send crypto peer-to-peer for years and launched its own stablecoin in 2023.

On the capital markets side, the SEC’s approval for BlackRock’s iShares Bitcoin Trust (IBIT) to list and trade options on Nasdaq is another major milestone, even if further clearance from the CFTC and OCC is still required before these options can officially go live. As Josh Lim, formerly of Genesis and now at Arbelos, explained in a recent podcast with Laura Shin, these bitcoin options ETFs unlock significant capital . While the spot market has limited appeal for certain investors, a spot options ETF introduces new opportunities. Traders can now utilize yield strategies, and asset managers can develop structured products, inviting new participants into the space.

Moreover, this new tool offers a way to access leverage, something that has been limited in institutional markets since the 2022 credit crisis. Options allow traders to take long positions with less capital than spot trades, as only the premium is required upfront. Since 2022, lenders have tightened collateral requirements and reduced capital availability, given the excesses of the rehypothecation game played by firms like Three Arrows Capital at the time.

Interestingly, the current lack of credit in the crypto space is bullish, as we’ve noted before—there’s no artificial price inflation from excess leverage. With options trading now available in regulated markets, we will likely see new capital flow into well-structured investments, offering a robust alternative to purely spot-driven markets. This could reignite interest and allocate capital toward diverse assets beyond just Bitcoin. At least to an extent.

The Block’s Frank Chaparro serves up the latest headlines, charts, trends, and views on crypto and DeFi from around The Block, Twitter, and The Scoop pod. Subscribe to The Scoop newsletter , which hits inboxes on Tuesday and Friday mornings.

Subscribe to The Scoop on Youtube , Apple , Spotify , Google Podcasts , Stitcher or wherever you listen to podcasts. Please send feedback and revision requests to [email protected] .

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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