Bitcoin is gearing up for a potential rally in the closing months of this year, with several developments lining up to provide a much-needed market boost, analysts say.
Despite a 4% decline on Tuesday following Iran’s missile strike on Israel, Bitcoin has since rebounded from two-week lows, climbing above $61,500 after dropping to as low as $60,300.
The decline came after Iran launched more than 180 ballistic missiles at Israel in retaliation for Israeli strikes on Hezbollah positions in Lebanon. The attack marked the first use of Iran’s hypersonic Fattah missiles, according to state media reports.
Major U.S. market indices for traditional equities also fell, with the Nasdaq Composite dropping 1.53%, the S&P 500 declining 0.93%, and the Dow Jones Industrial Average down 0.41%.
Yet even as investors attempt to discern the economic impact of flaring tensions in the Middle East, four major tailwinds stand out, according to K33 Research analysts Vetle Lunde and David Zimmerman.
Those include China’s aggressive stimulus measures, shifting U.S. macroeconomic data, the upcoming presidential election, and a liquidity boost from FTX’s bankruptcy payouts, the pair wrote in a recent investor note on Tuesday.
China's boost to global liquidity
China’s recent aggressive stimulus measures are expected to have a continued positive impact on global liquidity, the analysts said. Last month, the People’s Bank of China introduced a series of rate cuts and rolled out a $142 billion stimulus package.
China's rate cuts and fiscal stimulus are aimed at averting a recession and stimulating growth, moves that typically foster a more favorable environment for speculative risk assets like Bitcoin.
Employment figures
The upcoming U.S. employment data release, scheduled for Friday, is also expected to play a role in shaping short-term market sentiment.
Bitcoin’s correlation with U.S. equities has reached multi-year highs, with employment figures likely influencing interest rate expectations and, in turn, market behavior.
A favorable outlook through a steady increase in employment could provide a further boost to Bitcoin as investors reassess the macroeconomic landscape.
Roughly 150,000 jobs are tipped to have been added to nonfarm payroll figures in September, up from the previous month's 142,000.
US election
The U.S. presidential election is the third factor with candidates Vice President Kamala Harris and former President Donald Trump vying for the top job.
Scheduled for Nov. 5, market analysts expect a Trump victory to serve as a positive catalyst for Bitcoin, given his more favorable stance towards the crypto industry in recent years.
In contrast, a Kamala Harris win could lead to a short-term negative market reaction due to her administration’s anticipated regulatory approach to digital assets.
“Markets don’t like uncertainty, and for an emerging industry like crypto, the uncertainty of the November elections will be an overhang,” Samir Kerbage, chief investment officer at Hashdex, told Decrypt.
Regardless of who wins, crypto will likely enter a “more favorable policy environment,” Kerbage added. That could be good news for industry participants who have long called for clearer rules of the road.
FTX creditors
Finally, anticipated payouts from FTX’s bankruptcy are expected to provide Bitcoin a boost, with creditors slated to inject approximately $2.5 billion into the crypto market in late Q4 or early Q1, according to Lunde and Zimmerman.
On Tuesday, a plan to reorganize bankrupt crypto exchange FTX gained support from 94% of creditors from its offshore platform, FTX.com, CoinDesk reported.
The plan seeks to return 118% of claims in cash to most creditors, representing approximately $6.83 billion in claims. With creditor approval in place, the plan moves to the bankruptcy court for confirmation, with a hearing set for Oct. 7.
The payout of $6.83 billion is part of a broader distribution. In May, FTX’s bankruptcy estate announced that creditors and customers are expected to receive between $14.5 billion and $16.3 billion in total compensation, covering all claims across FTX’s former platforms.
In any case, the liquidation of those assets is expected to result in significant repurchasing of crypto, providing a liquidity boost to Bitcoin and other digital assets, the analysts said.