As referenced last month, Bitcoin's status as the best performing asset year-to-date has been further amplified in October as it rallied over 35% in just 12 days from ~$26500 up to $35150*. As the market continues to pick up steam and crypto as a whole sees greater inflows of capital, it's looking increasingly like the depths of the bear market are behind us. Let's dive into what's caused Bitcoin to rally so aggressively, discuss Ethers comparative underperformance and look at a few other moments of significance across the month. 

The bid for Bitcoin started at the month’s open with a strong NFP report and was followed quickly by the horrifying terror attack on Israel on the 7th leading to the ongoing Israel-Hamas war. Bitcoin, alongside gold, saw inflows off the back of this geopolitical tension as war spending is often inflationary, so gold - and increasingly Bitcoin (as a politically agnostic digital store of value) - act as an attractive wealth preservation asset in times of turmoil. However, the real catalyst for the aggressive upside move in the price of Bitcoin has been a reignition of hopes around the approval of a spot BTC ETF in the US. On the 16th October a false rumour was started by the cointelegraph twitter account; stating that the Blackrock Ishares ETF had been approved, leading Bitcoin to rally over 7% in under 30 minutes and then dump right back down after the rumour was quickly dispelled*. Though false, what this showed the market was that capital has been waiting on the sidelines to be deployed on the ETF approval and BTC has remained bid on ever since. Gradually climbing up to $30k before shooting up past $35k on the 24th October after the Blackrock Ishares ticker (IBTC) was registered and found on the DTCC website, spurring further anticipation of an approval in the near future*. 

As Bitcoin's price continues to rise, so too has its market dominance; with Bitcoin’s percentage of the overall crypto market capitalisation hitting above 54% as of last week, the highest point since April 2021^. While Bitcoin has seen the lion's share of the capital inflows into the space, Ether, the second largest cryptoasset by market cap, has not fared nearly as well in 2024. Given the high-rate environment, Bitcoin as digital gold has benefitted from the heightened geopolitical tensions, whereas Ether, being the utility token for a more complex technological network, has been viewed more closely to a tech stock or similar risk-on asset. But also, the lacklustre market response to the Ether CME futures ETF's that went live at the start of October further exacerbated things, leading ETH/BTC to hit 0.052 its lowest point since June 2022^. 

While onchain activity has remained somewhat stagnant, even dropping with the likes of friend.tech falling out of favour as quickly as it came. The largest application built on Ethereum hit its community of token holders with some shocking news this month, as Uniswap announced it would be implementing a fee for all users of its front-end. Whilst this may sound reasonable, it in fact highlights a contradiction at the heart of the largest decentralised exchange and a divergence of interests between token holders and equity holders. During the depths of the bear market, the Uniswap team decided to raise capital and so spun up a new legal entity for Uniswap Labs, for which they distributed equity to shareholders. They decided to give this legal entity ownership rights of the Uniswap front-end and the protocol itself would remain in the hands of the Foundation/DAO. However, as the regulatory environment in the US has meant the protocol has been unable to capitalise on its continued profitability and revenue streams by implementing a fee switch, instead the equity holders have sought to do so by levying a 0.15% fee for every transaction through the front-end. Ultimately, by extracting value from users through the front end, the team has chosen to prioritise benefit accruing to the equity holders over the token holder and, in doing so, undermined the purpose of having a token to align incentives in the first place. 

The final piece of drama that's continued to unravel across October has been Sam Bankman-Fried's trial for the fraud of the century: FTX. In the final days of the trial, after the inner sanctum of FTX employees including Caroline Ellison and Nishad Singh delivered damning testimonies against SBF, the man himself decided to take the stand to offer his own account of events. What resulted was a testimony that contradicted his former colleagues and attempted to paint a picture of good faith behaviour with logical business reasonings for all dealing between FTX and Alameda. However, as the prosecution took over and the questions targeted more piercing matters such as whether Bankman-fried had consulted with Ellison on creating numerous false balance sheets to show creditors, he seemed to be hit with a bout of amnesia that was akin to the 'I do not recall that transaction' scene from the Wolf of Wall Street... However, the matter closes for Sam Bankman-Fried and FTX, I think it's safe to say we'll all be happy to see the end of that saga. 

As always please send any feedback, suggestions or comments to the Team mailbox. 

Best Oliver Wink, on behalf of the Digital Assets team. 

*Data sourced from Bloomberg 

^Data sourced from Trading View