As BTC rallies after jobs report, what are the ‘Uptober’ odds?

Though bitcoin rallied Friday after a stronger-than-expected jobs report, industry watchers said geopolitical uncertainties could temper economic optimism in the coming weeks.  

Crypto investors sometimes refer to October as “Uptober” due to the gains bitcoin has historically seen during the month.

BTC gains in October have averaged roughly 20% since the asset’s inception, noted 21Shares research head Adrian Fritz. The trend is even more pronounced in halving years, he added. These generally also coincide with election cycles.

“Global central banks are cutting rates and liquidity is beginning to trend upwards,” Fritz explained. “Historically bitcoin has performed well during periods of monetary easing.”

But XBTO Chief Commercial Officer Javier Rodriguez-Alarcon told Blockworks that the upcoming US elections, uncertainty around the Fed’s rate path and an escalating conflict in the Middle East could lead to significant disruptions.

Read more from our opinion section: Political candidates can no longer ignore crypto voters

“We believe these factors will impact crypto markets, leaving little room for typical seasonality effects to play out this year,” he added.

Bitcoin’s price jumped to roughly $62,000 soon after the US Bureau of Labor Statistics reported nonfarm payroll employment rising by 254,000 in September. That was up from a revised 159,000 increase in August. The unemployment rate, at 4.1%, was lower than the 4.2% expectation.      

BTC fluctuated from there, ending up around $62,300 by 4 pm ET — up 2.5% from 24 hours prior. 

Susannah Streeter, head of money and markets at Hargreaves Lansdown, noted the Federal Reserve’s concerns about the jobs market potentially cooling off rapidly. That led to the US central bank’s 50-basis point cut last month. 

“These latest numbers will help assuage those worries and add to a picture of a resilient US economy, which appears to be heading for a soft landing,” Streeter added in a statement this morning. 

The odds of a 25bps Fed rate cut next month sat at 95.5% at 4 pm ET, according to data from CME Group — up from about 47% a week ago. 

October kicked off with a downward market move spurred in part by an Iranian missile attack on Israel. That came after Israel launched a ground operation in Lebanon. 

Bitcoin dropped to roughly $60,000 on Oct. 1. US spot bitcoin ETFs saw net outflows of $243 million that day, Farside Investors data shows — the largest in a single day in nearly a month.

Industry watchers noted that the risk of further escalation in the Middle East could make markets more sensitive to short-term developments as traders reprice risk.

“While the first half of October could see declines of 8% to 10%, we still expect the month to end neutral to positive, depending on when the uncertainty regarding geopolitical conditions alleviates,” Bitfinex derivatives head Jag Kooner said in a statement.

Some crypto segment observers have pointed out that a slow start to October — from a crypto price perspective — has not necessarily been a signal of how the month would end. 

CoinGlass data shows, for example, a roughly 10% BTC price gain on Oct. 22, 2023 after mild fluctuations earlier that month. 

Political developments could also impact crypto prices in the coming weeks given the US presidential election is just 32 days away. 

Research published this week by crypto platform XBTO shows that bitcoin’s volatility is more correlated to traditional financial markets now than it was during the 2016 and 2020 election cycles.

There was a +86% correlation between BTC and the S&P 500 this year, the Thursday report noted. That compares to -39% in 2020 and +36% in 2016.

Donald Trump and Kamala Harris have both made pro-crypto comments as some expect crypto holders to represent a key voting bloc in November. While Trump has voiced support for bitcoin miners and vowed to halt government bitcoin sales, Harris more recently said during a fundraiser that her administration would help grow investment in the crypto and AI segments.

“As the election draws nearer, market participants should brace for continued volatility, driven by the unpredictable nature of the election outcome and its potential impact on future crypto policies,” Rodriguez-Alarcon said.

A modified version of this article first appeared in the daily Forward Guidance newsletter. Subscribe here so you don’t miss tomorrow’s edition.

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