A spike in interest rates this month has bulldozed stocks and bonds alike, but Bitcoin could stay on an upward trajectory no matter where rates go from here, an analyst said.
In the first few days of October, Bitcoin has risen 2.5% to about $26,500, compared with a 0.1% rise for the Nasdaq 100 index. Over the past month, the largest cryptocurrency has risen about 7.4%, versus the Nasdaq 100’s 4.2% drop.
For the past several years, Bitcoin and other tokens have mostly acted like tech stocks—bolstered when rates fall but hurt when rising rates punish investments without cash flow. But this time, Bitcoin could actually be a beneficiary of higher rates, argued Fundstrat analyst Sean Farrell in a research note Thursday.
Bitcoin prices rose in March, as Silicon Valley Bank and other financial institutions collapsed, and some investors in the past couple of weeks have likely bought tokens in anticipation of rising rates causing more banking crises, Farrell wrote.
On the other hand, if interest rates peak or start to drop, Bitcoin could still benefit along with other risky assets, he wrote, since falling rates tend to help investments such as cryptocurrencies that don’t generate income. This creates what Farrell describes as a “somewhat asymmetric situation” that warrants increasing exposure to tokens as the fourth quarter begins.
Despite the recent outperformance, for several months, Bitcoin prices have been stuck in a range between $26,000 and $28,000, a phenomenon that has contributed to declining interest in crypto from retail investors and plummeting trading volume at companies such as Coinbase Global (ticker: COIN).
That could change as October has historically been a good month for Bitcoin prices, albeit with an extremely small sample size, leading some traders to dub it “Uptober.”
Another factor is a decision coming from the Securities and Exchange Commission by next Friday.
By that deadline, the SEC has to decide whether it will appeal a ruling that makes it all but inevitable that a spot Bitcoin exchange-traded fund comes to market. In August, a court said the SEC erred when it rejected attempts by Grayscale Investments to convert the Grayscale Bitcoin Trust (GBTC) into an ETF.
If the SEC decides to appeal—or to find other ways to delay Bitcoin ETFs coming to market—it could lead to weak token prices. On the other hand, if the SEC indicates that it is working toward allowing the ETFs, analysts have said it could spark the entrance of tens of billions of dollars in institutional money into the asset class.
It might just be the courts, rather than the calendar, that has the last say on Bitcoin’s performance this month.
