Bitcoin jumps to start October and analysts see strong fourth-quarter ahead for crypto

Published Fri, Oct 1 202110:45 AM EDTUpdated Fri, Oct 1 20213:54 PM EDT

Cryptocurrencies got off to a rough start for the third quarter but ended with solid gains, overcoming a raft of negative headlines on the space. And prices were hopping on the first day of October as investors bet on a fourth-quarter run. Bitcoin popped about 8% to above $47,000 on Friday, according to Coin Metrics. Ethereum jumped 9%. During the third quarter, Bitcoin hovered in the low $33,000 range to start the period, still navigating a two-month correction period following a string of negative stories. It ended the quarter 25% higher, at around $43,800. Ether gained 32% for the quarter, finishing at about $3,000. For the year, bitcoin is up more than 60% while ethereum is up 340%. "The first two weeks in July were pretty rough with a lot of momentum sellers continuing to pile on and a lot of fear coming into the market," said Jeff Dorman, chief investment officer at Arca. " One by one of the factors that people were using as a reason to get pretty bearish on the market all just knocked out." China issued a ban on cryptocurrency mining at the beginning of the quarter, followed recently by a ban on crypto transactions. There were also fears that the institutional interest that fueled the bitcoin bull run to start 2021 was waning. Bitcoin finished September with a 7% slide. "September hasn't been a great month but it's been pretty steady buying and pretty steady interest across really what is becoming five unique sectors of the digital asset economy" – DeFi, gaming and NFTs, Web 3.0 and Ethereum competitors, in addition to bitcoin, Dorman said. On Friday, the comeback triggered a short-term buy signal based on the MACD technical analysis signal, according to Katie Stockton of Fairlead Strategies, but she was hesitant to become outright bullish yet. Bitcoin remained dominant, but it didn't lead the market While bitcoin and ether finished higher and remain the largest assets by market cap, but it was the emerging assets that led the charge through Q3, Dorman said. The popular Ethereum-based game Axie Infinity surged as high as 900% in the quarter while another game, Illuvium, soared as much as 600%, he added. NFT marketplaces collectively saw monthly volume of $3.25 billion in August compared to $304.7 million in July, according to data compiled by The Block. Noelle Acheson, head of market insights at Genesis, noted that while the second quarter NFT boom was about athletes, musicians, and representing changing tastes in lifestyle, in the third quarter, there was a big focus on infrastructure. "It's becoming more sophisticated and I think we're going to start to see some bear fruits in terms of products coming to market, such as lending products or the inclusion of NFTs in the crypto marketplace as a whole," she said. Emerging Ethereum competitors like Solana and Cardano were top of mind for market participants, according to Pete Humiston, manager at Kraken Intelligence. Solana's sol token is up more than 5,000% in 2021, according to CoinGecko. He also noted Solana is now the most staked layer 1 blockchain compared to peers like Ethereum and Cardano. "All of them performed pretty differently over the three-month span, but for the most part, up and to the right, and it was pretty healthy to see completely different factors driving the strengths and weaknesses across these different sectors," said Dorman. Dorman said bitcoin is still highly important it's just "no longer leading or necessary to be invested in other areas," like DeFi, NFTs or gaming. Axie Infinity, for example, has 1.5 million daily active users, but most have never touched bitcoin, he added. "People are coming directly to them that have never been invested in digital assets before," he said. "You're starting to see these different on ramps, which ultimately benefit the entire ecosystem. It used to be bitcoin first everything else second and now, in some ways it's the opposite." Fourth quarter boost? Dorman and Acheson expect bitcoin and ether prices to do well in the next quarter, though they encourage investors to take a longer view than three months. Ari Wald from Oppenheimer said bitcoin has fallen below $46,000 support at its 200-day average and that that may have taken some near-term technical traders out of it for the time being. "Next support is at $40,000, and generally looks listless which has us on the sidelines," he said. "Ethereum is still above its 200-day average which we see as a sign of relative strength. Look for technical traders to buy this pullback with a stop at $2,635 marking this smoothed trend." Dorman noted that historically the fourth quarter tends to be good for bitcoin. In 2020, he noted, it was only up about 45% to 50% for the year by the end of the third quarter, and then finished the full year up 300%. It might not get that surge this year, however. "This year, all the catalysts had nothing to do with bitcoin," he said. "I think there's a reason to be optimistic for the fourth quarter, I'm just not expecting bitcoin to catch up as fast as it did last year I think it will probably continue to be a laggard as we continue to see growth in Ethereum and other ecosystems and gaming entities." The drumbeat for regulation got louder in the third quarter as lawmakers fought over crypto's place in the infrastructure bill. In the coming quarter, crypto observers expect a bitcoin futures ETF that could get approved, per hints by Securities and Exchange Commission chair Gary Gensler. "That will be significant, even if only in terms of sentiment," Acheson said. "I'm not convinced it will be a big market mover," she added, noting that a futures-based ETF isn't exactly what investors want, though it's what Gensler is more comfortable with. She also noted that there have been rumblings that stablecoin regulation is coming in the fourth quarter. "None of this is bad," she said. "Regulation is a positive force, but it does make the market very nervous."

So-called blockchain bridges have become a prime target for hackers seeking to exploit vulnerabilities in the world of decentralized finance.

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Cryptocurrencies got off to a rough start for the third quarter but ended with solid gains, overcoming a raft of negative headlines on the space.

And prices were hopping on the first day of October as investors bet on a fourth-quarter run. Bitcoin popped about 8% to above $47,000 on Friday, according to Coin Metrics. Ethereum jumped 9%.