Why is Bitcoin rising? The Asian markets are pushing it up

Why has the price of Bitcoin been rising in the last four days? Let’s review and analyze the main causes of this bull trend. 

The decline of the previous days

After falling below $54,000 at the beginning of September, the price of Bitcoin had started a climb that lasted from September 9 to 27.

Thanks to that rise, it had climbed back above $66,000, with a +24% in just over two weeks.

Once that climb was over, however, there was a small correction, which began on Monday, September 30 (a week ago) due to the new surge in tensions in the Middle East. 

In this period, the worst bearish force seems to be the risks of an escalation in the Middle East, following the missile attack by Iran on Israel, which might be followed by an attack by Israel on Iran.

Due to that correction, the price had returned to around 60,000$ last Thursday, but at that point, the correction stopped. 

Why is Bitcoin rising today?

Already on Friday, the price of Bitcoin had returned above $61,000, and over the weekend, with traditional markets closed, it also returned above $63,000. But why is BTC (Bitcoin) rising right now?

However, the most interesting thing is that during the night, after the opening of the Asian markets, it rose again to almost reach $64,000, although it later fell back below $63,000, still due to fears related to the situation in the Middle East. 

This small rise should be interpreted as a post-correction rebound, because probably the correction had been a bit exaggerated. 

It is indeed necessary to remember that many believe it is at least possible that in the second half of the month a new rally, or even a new true bull run, could start in anticipation of the American elections.

The relationship with the American dollar (USD)

The key to understanding in this case is the inverse correlation with the US dollar. 

In the medium/long term, in fact, the price of Bitcoin appears inversely correlated to the Dollar Index. In the short term, it is not always the case, but in the medium/long term, it often is, albeit with some exceptions.

The point in this case is that after the presidential elections in the USA, the Dollar Index tends to weaken, and this helps the price of BTC to grow. 

In all three previous instances where elections were held in the USA since Bitcoin has existed (2012, 2016, and 2020), the price of BTC entered a bull run either just before or just after the elections themselves. The next ones will be held on November 5th of this year.

Furthermore, on all four occasions, including 2024, the year of the US presidential elections was accompanied by a Bitcoin halving.

Why is Bitcoin rising during the opening of the Asian markets?

Despite this, the rise last night to almost $64,000 was produced by the Asian markets. 

In fact, when the Asian stock markets closed, the price of Bitcoin then fell back below $63,000. 

In this specific case, the key point is the monetary policy of the Chinese central bank. 

China has been opting for a sort of QE for weeks now, which means injecting liquidity into the financial system. 

For example, the Hong Kong stock exchange has been growing almost continuously since the session on September 11, with only three negative sessions since then and as many as 10 clearly or very positive. 

The last negative session was last Thursday, but since that close, the Hang Seng index has already risen by 4.5%.

But the truly unusual thing is the fact that in less than a month the value of this index has risen from 16,900 points to almost 23,100 points, a level that had not been seen since February 2022. 

Instead, from January 2023 to January 2024, it had dropped in twelve months from 22,700 points to 14,800. Compared to this annual low of 2024, the rise up to today has been as much as 55%, the majority of which occurred in the last four weeks. 

Contrasting Dynamics

So on one side we have the Asian markets pushing the price of risk-on assets like Bitcoin upwards. 

On the other hand, we have the geopolitical tensions in the Middle East that push it downward. 

At this moment, with the traditional Asian markets closed, the second dynamic is prevailing, while last night the first one prevailed. 

However, over the weekend, with traditional exchanges closed, an upward trend prevailed, probably due to the fact that the crypto markets are beginning to price in the hypothesis of a bullrun in the second half of the month.

The monetary policy of the Fed between rate cuts and quantitative easing

To all this, a third dynamic must necessarily be added, instead linked to the monetary policy of the central bank of the United States. 

In this regard, it is necessary to emphasize that the financial markets until relatively few days ago were convinced that even at the next FOMC meeting, scheduled for November 7, the Fed could have opted for another rate cut of 50 basis points. 

Instead, in recent days, they first started pricing in a cut of only 25 basis points, then they even began to speculate that there is some probability, although very small, that the Fed on November 7 might even decide not to cut rates. Subsequently, they also practically eliminated the hypothesis that the cut could actually be 50 points. 

So if at this moment there is euphoria in the Asian markets, after years of crisis, in the US markets there is still a lot of uncertainty. 

There is, however, at least one positive piece of data coming from the USA, namely the collapse of the chances of a short-term recession. In such a scenario, if tensions in the Middle East were to decrease, one can expect a decidedly positive reaction from the markets.