Bitcoin started the week trading around $63,000 and ended slightly higher, amid a mix of bearish industry headwinds and bullish political tailwinds. After briefly dipping below $63,000 on Sunday night, the CME futures market closed the week near $63,300, marking a marginal gain of less than 1%.

Despite the flat week-end price, intra-week volatility was notable, with bitcoin dropping as low as $59,000 on Thursday after reaching nearly $65,000 on Monday — a swing of over 9%. Several factors contributed to this volatility.

Inflation Worries and Crypto Market Crackdown

The U.S. Consumer Price Index (CPI) report for September, released midweek, revealed higher-than-expected inflation levels, which dampened expectations for a potential 50 basis-point rate cut by the Federal Reserve. This triggered uncertainty, negatively affecting investor sentiment.

Adding to the pressure, the U.S. Department of Justice (DOJ) announced a major crackdown on crypto market manipulation, charging 14 individuals and four companies involved in wash trading and pump-and-dump schemes. Authorities seized over $25 million in digital assets and even created a fake token to expose alleged manipulators. This unprecedented legal action further unsettled the market, contributing to bitcoin’s brief dip below $60,000.

The regulatory scrutiny injected heightened caution into the market, with investors growing wary of potential further crackdowns on the crypto industry.

Election 2024 Betting Odds Turn the Tide

Political developments played a crucial role in bitcoin’s recovery later in the week. As of Friday, the betting odds for the 2024 U.S. presidential election showed a significant shift, with Donald Trump gaining a nearly nine-percentage-point lead over Kamala Harris. This represented a dramatic 12-point swing from just two weeks ago when Trump was trailing Harris by 3%.

The improving odds for Trump, who is perceived as more crypto-friendly, likely contributed to bitcoin’s 6% rally on Friday. A Trump victory is expected to bring a more favorable regulatory environment for the crypto industry, which helped boost prices across the board.

Institutional Demand and MicroStrategy’s Surge

Adding to the bullish momentum, MicroStrategy’s stock surged to an all-time high of $205, further fueling optimism in the market. As the largest corporate holder of bitcoin, MicroStrategy’s actions serve as a barometer for institutional demand.

CEO Michael Saylor’s long-term projections of bitcoin reaching millions per coin only intensified bullish sentiment. This strong correlation between MicroStrategy (MSTR) stock and bitcoin’s price continues to drive both assets higher.

Spot ETF Flows Remain Consistent

Despite the bearish price action mid-week, spot ETF flows remained steady. By the end of the week, total assets under management for all bitcoin spot ETF issuers stood near $59 billion, just short of the $62.56 billion peak back in March. The biggest inflows this week came from Fidelity’s FBTC fund, which saw $117 million in new capital.

Bitcoin Open Interest Data

Bitcoin open interest data continues to sit at elevated levels, suggesting traders are taking on significant positions as we move toward the end of the year. By the close of the week, there was over $37 billion in open interest aggregated across all exchanges, a signal that both traders and investors are preparing for a substantial move in bitcoin soon — likely coinciding with the U.S. election cycle.

On the month, bitcoin is down 1.71%, but with over half of October remaining, there is still a strong possibility for a positive finish. October has historically been a bullish month for bitcoin, and this seasonality could support further upward momentum, as discussed in previous newsletters.

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