U.S. stocks and cryptocurrencies have historically performed well in October. However, with concerns over persistent inflation and a slowing global economy, investors are eyeing how the assets may end this month.
Over the past 10 years, bitcoin
BTCUSD,
had an average return of over 18% in October, according to analysts at Kaiko Research. October is also the highest returning month for U.S. equities since the 1950s, with strong performance especially in midterm years.
So far this month, bitcoin was up 0.8%, according to CoinDesk data. The Dow Jones Industrial Average
DJIA,
has gained 9.7% during the same stretch and the S&P 500
SPX,
was up 5.9%, according to Dow Jones market data. The Nasdaq Composite
COMP,
gained 3.6%.
U.S. stocks have logged gains in volatile trade, rising last week amid renewed hopes that the Fed might pivot from its tightening of monetary policy and as some companies delivered better-than-expected earnings.
Bitcoin, on the other hand, has been rangebound, trading mostly in the range of $19,000 and $20,000 for the past few weeks. It has led to corresponding trading activity in the options market, which in turn strengthened bitcoin’s consolidation, according to Yuya Hasegawa, crypto market analyst at Bitbank.
Options are derivatives that allow traders to bet on prices of underlying assets within a specific period. Call options give investors the right but not the obligation to buy the underlying asset at a certain price within a specific time frame, while put options allow holders to sell the asset.
There’s a particularly large amount of options outstanding with the strike prices of $19,000 and $20,000, according to data from Coinglass. “Options traders who opened positions at those levels may have been contributing to bitcoin’s lack of direction,” Hasegawa said in a Monday note.
According to Hasegawa, holders of put options with a strike price of $19,000 could profit immediately as bitcoin falls below that level. However, in anticipation that the crypto might soon go back above $19,000, they might want to capture that gain as well, and buy more bitcoins, pushing up the crypto’s price.
On the other hand, holders of call options with a strike price of $20,000 might profit as bitcoin rises above the level. These holders may then short bitcoin in case the crypto falls back down to the range of $19,000 and $20,000.
Still. macroeconomic concerns remain the dominant factor, as nothing has really broken the strong correlation between bitcoin and equities, said Eric Chen, chief executive and co-founder of Injective Labs. “So whatever is good for tech stocks, it’s good for bitcoin and the crypto market as a whole,” Chen said.
Later this week, investors will see gross domestic product data due Thursday, and PCE data, a key gauge of U.S. inflation, due Friday.
