A look back at October:  Uptober in the crypto universe!

Crypto markets outperformed other asset classes by a milewide margin in October, rightly earning its nickname “Uptober.”

The price of Bitcoin took off mid-October on rumors that the dozen applications for spot Bitcoin exchange traded funds (ETFs) on the US regulator’s table had been approved. These turned out to be false but hopes that they will be approved early next year or earlier lingered.

The price of Bitcoin rose by 23 percent in October and by 108 percent since the beginning of the year. The global stock market performance is trailing way behind. The benchmark Dow Jones index is down 0.3 percent so far this year, and the FTSE index in the UK is down 3.8 percent. The tech-heavy Nasdaq index is up 25 percent.

The market capitalization of Bitcoin overtook that of Tesla during the month, making it the world’s 11th largest asset behind gold, and tech stocks such as Apple, Microsoft, Alphabet and NVIDIA.

“Based on current data, signs indicate that crypto winter may be in the past and that crypto spring is likely on the horizon,” Morgan Stanley analyst Denny Galindo is quoted as saying by Bitcoin.com. This is reflected in the monthly cryptocurrency exchange volumes. They rose to 475 billion dollars – the highest level since April. Binance remains the largest exchange.

The other major event attracting the interest of the cryptosphere was the start of the trial against Sam Bankman-Fried, the CEO of the bankrupt crypto exchange FTX, that began on Oct 3. Roughly 9 billion dollars in customer funds are missing from FTX.

Updated ETF applications triggered hopes of imminent spot Bitcoin ETF approvals

Mid October, regulatory filings showed that asset managers that had filed ETF applications (ARK Invest, Fidelity, ProShares, BlackRock and Grayscale Investments…) had updated them to respond to the questions raised by the Securities and Exchange Commission (SEC). The regulator is concerned about market manipulation and has requested details about the existence of surveillance-sharing agreements with larger regulated market players.

“Many of the legitimate questions [reported data, money laundering, know your customer, bank secrecy] that stood in the way of a $BTC ETF have been answered to sophisticated parties and many regulators satisfaction,” the former Chair of the SEC, Jay Clayton, told CNBC.  He considers their approval “is inevitable.”

Another signal which triggered hopes of a swift approval of these ETFs was the discovery of ticker symbols of BlackRock’s and ARK Invest yet to be approved ETFs in the Depositary Trust & Clearing Corporations (DTCC)’s product listing.

SEC’s deadline for ruling on ARK Invest’s application expires on Jan 10, 2024. Market experts expect the US regulator to approve them in one go to avoid competitive disadvantages.

ETF approvals likely to lead to billions of inflows

“The sheer size of the US institutional market… is enormous, and to have a product that will be accessible to them [the sport Bitcoin ETFs]… We’ve estimated using some of the statistics that came from when the gold ETF was launched in 2004. If anything close to that occurs with Bitcoin, and potentially Ethereum spot ETFs, this could be $150 to $200 billions of inflow into these products,” Steve Schoenfeld, the CEO of Marketvector Indexes, is quoted as saying by Bitcoin.com.

“The looming institutional FOMO [fear of missing out], once Bitcoin ETF Spots get the green light, could potentially ignite a bull run, propelling us to new heights in the crypto market,” the co-founder of Glassnode, Yann Allemann, echoed.

This massive demand for Bitcoin is set to buoy its price. Matrixport’s Head of Research and Strategy, Markus Thielen, expects the price of Bitcoin to rally to 56,000 dollars in the case of inflows of 50 billion dollars.

Once approved, a selloff of Bitcoin may result, the chief market strategist at inthemoneystocks.com, Gareth Soloway, warned. “If Bitcoin is still up here [around 35,000 dollars], you may not go higher. It may be already factoring in the approval. It’s very possible it could be a sell on the news,” Soloway told Gareth Soloway told Kitco news.

An outright rejection of the ETF applications by the SEC is on the other side likely to trigger a wave of lawsuits, JP Morgan wrote in a note seen by the Block.

Ethereum futures ETFs fail to attract investors’ interest, new spot ETH applications filed

Early October, the launch of six Ether futures ETFs by Bitwise, VanEck, ProShares and others failed to attract much interest from investors. “The [6] Ethereum futures exchange traded funds (ETFs) launched in the US (on Oct 3) attracted just under $10m in the first week, highlighting tepid appetite, particularly in comparison to the launch of futures-based Bitcoin ETFs which saw $1bn in the first week,” according to CoinShares’ weekly report.

Separately, Grayscale Investments filed an application to convert its Ethereum Trust to a spot Ethereum ETF, while Invesco Galaxy filed an application to issue a spot Ether ETF. Previous applications from ARK Invest and VanEck saw their deadlines postponed to Christmas.

As for Ethereum’s Cancun/Deneb upgrade (Dencun), it will be delayed until early 2024. Discovered bugs will delay the planned launch, as additional tests on the blockchain’s testnet Goerli need to be held, participants at a developers call were told.

Ripple wins some ground in court

Ripple had tailwinds in the US courts in October. Not only did the judge rejected the interlocutory appeal filed by the SEC against her July decision that Ripple’s crypto coin XRP does not qualify as a security when sold to retail investors. The US regulator also voluntary dropped its charges against Ripple’s CEO Brian Armstrong and its Executive Chairman Chris Larsen. The lawsuit is scheduled for April 2024.  

“I don’t expect a final judgment, issued by Judge Torres, until late summer, at the earliest. It literally could take a full year before an appeal is filed in this case,” according to the attorney John Deaton, who represents 75,000 XRP holders.

Solana jumps on hopes that FTX will return most client funds

Solana rallied 57 percent in October on hopes that the bankrupt crypto exchange FTX will return up to 90 percent of its client funds. FTX holds more than 55 million Solana coins, equivalent to 2.1 billions dollars at today’s price.

The world’s seventh-largest crypto currency has more than tripled in value so far this year, clearly outperforming Bitcoin. Solana is up 291 percent since the beginning of the year, while Bitcoin is up 108 percent.

New Chainlink staking platform to be introduced by year-end

Chainlink Staking v0.2 will be launched later this year, following last December’s release of its v0.1 staking version, the issuer of the world’s 12th largest cryptocurrency said. This new version will feature an unbonding mechanism, enabling stakers to withdraw their funds whenever they want, as well as liquid rewards. Chainlink surged by 40 percent in October.

Binance’s market share continues to fall

The market share of the world’s largest centralized crypto exchange, Binance, continued to fall. It stood at 40 percent in October compared to 61 percent in January, according to the Block data. Meanwhile, Brazilian authorities want Binance’s CEO CZ indicted for operating alleged Ponzi schemes. He is, as well as three other Binance employees, accused of fraudulent management amongst others.

In the US,  Binance.US has halted all direct withdrawals of US dollars, the exchange’s updated Terms of Use show. In Europe, Binance signed agreements with new fiat partners for its European clients: Open Banking and SEPA/SEPA Instant for deposits and withdrawals of euros, and SEPA/SEPA Instant for buying and selling of crypto assets, Its partnership with VISA, however, ends on Dec 20, Bloomberg reports.

Coinbase & Kraken continue expansion outside of the US

Coinbase, the US’ largest crypto exchange, continued its expansion outside the US during the month, expanding in Singapore where it obtained a Major Payment Institution (MPI) license and on Bermuda where it got an approval to enable perpetual futures for eligible non-US retail investors. Another leading crypto exchange, Kraken, plans to buy the Dutch crypto broker Coin Meester (BCM).

Stablecoin issuers hold billions worth of US bonds

Stablecoin issuers such as Tether, Circle and TrueUSD now rank 16th among the world’s largest holders of US government bonds, Will Clemente writes citing The Block data. Their use is also taking off. JP Morgan’s stablecoin JPM Coin handles more than 1 billion dollars in daily transactions, compared to a mere 300 million dollars in June, the bank’s global head of payments, Takis Georgakopoulos told Bloomberg.

Delisting of crypto coins accelerates

The delisting of crypto coins from exchanges is accelerating, reaching unprecedented levels, Kaiko data show. Roughly 3,500 tokens have been taken off centralized crypto exchanges so far this year, compared to 1,500 in 2021 and 14 in 2016, Bloomberg reports.

Central banks cooperate to track crypto assets

The Bank for International Settlements (BIS), the European Central Bank (ECB) as well as the French, German and Dutch central banks will cooperate to monitor both on and off-chain crypto transactions on public networks. The project, dubbed Project Atlas, “fuses data gathered from crypto exchanges (off-chain data) with data from public blockchains (on-chain data) gathered from nodes,” the BIS said.

This turned into a highly topical issue after Hamas attacked Israel on Oct 7 and hundreds of crypto account used to raise money for Hamas were frozen by the Israeli authorities. More than 100 US senators reacted by raising their concerns over the use of crypto assets to finance terrorism. They claim that Hamas and Palestininan Islamic Jihad have raised more than 130 million in crypto between August 2021 and June 2023.

G20 finance minister & central bank governors adopt roadmap on crypto assets

The finance ministers and central bank governors of the G20 members adopted the roadmap on crypto assets presented to G20 leaders in September. “This detailed and action-oriented roadmap will help coordinate global policy as well as develop mitigating strategies and regulations on crypto assets while also taking into consideration the specific implications on Emerging Markets and Developing Economies (EMDEs),” they said in a joint communiqué.

North America’s crypto market maintains its first place,

North America remains the largest crypto market, driven by institutional activity, ahead of both Europe and Central & Southern Asia and Oceania (CSAO), data from Chainanalysis show. There was little regulatory progress as for crypto assets in the US during the month, given the standstill in Congress following the absence of House Speaker for nearly 22 days.

EU leaders coordinate crypto taxation & request comments on MiCA regulation

The EU Council, the forum where the EU heads meet, adopted amendments to the directive on administrative cooperation in the field of taxation, known as DAC8. This mainly concerns the reporting and automatic exchange of information on revenues from transactions in crypto-assets and on advance tax rulings for high-net-worth individuals.

Meanwhile, interested parties are requested to submit their comments on the appropriate implementation of EU’s the Markets in Crypto Asset (MiCA) by Dec 14. The European Securities and Markets Authority (ESMA), in parallel asks market players “to make adequate preparations that will reduce the risk of disruptive business model adjustments” ahead of the full implementation of the directive in December 2024.

UK warns 220 crypto exchanges for non-compliance of new crypto marketing rules

New crypto marketing rules were enforced in the UK on Oct 8, requiring firms to be authorized, registered or have their marketing approved by an authorized firm. By the end of the month The Financial Conduct Authority (FCA) has issued more than 220 alerts to crypto exchanges illegally promoting crypto assets to UK consumers had been issued. The world’s fifth largest exchange, KuCoin, and the ninth largest, Huobi (HTX) were among those warned.

Furthermore, the Economic Crime and Corporate Transparency Act 2023 entered into force during October, UK authorities to seize crypto assets related to illegal activities such as drug trafficking or terrorism without a prior conviction.

Cyprus, Australia also consider strengthening their crypto rules, Qatar seeks input

The Cypriote Ministry of Finance has filed an amendment to the country’s existing anti-money laundering law, which would force all cryptocurrency service providers to register with its regulator or face fines or prison. In Australia, the government plans to impose a financial services license for all crypto exchanges holding more than 5 million Australian dollars that operate in the country. As for Qatar, it launched a public consultation on the introduction of a national digital assets framework running until Jan 2, 2024.

ECB moves ahead to preparation phase of the digital euro

Following a two-year long investigation phase, the European Central Bank (ECB) launched a preparation phase on Nov 1 that will last two years. This does not automatically mean that a central bank digital currency (CBDC) will eventually be issued by the ECB.