Bitcoin Taps & Rebound Off $80K as Federal Agencies Add Crypto Guardrails

SPEAKER_1 (0:00)

Let's welcome in Adam Lynch, Director Equity Research, Charles Schwab. I'm so glad you are with us. So tell us about the current levels, Bitcoin, Ethereum. I was reading a little bit of something about a short squeeze. What's going on this week in crypto?

Adam Lynch (0:14)

Yeah, Hanukkah. It has been a pretty interesting week. We had Bitcoin dip below 80K for the first time in a couple of weeks. Now we're back up to about 82, so sitting pretty strong. It has been a very volatile month though. We're back down at 76K in mid-September up to 87,000 early October. So it's been a bit of a wild ride. Ethereum was hit a little bit harder this month. Overall, it's been a pretty challenging year for the crypto majors. Bitcoin has been the better performer, but it's down about 5% year to date versus Ether off about 21% or so.

SPEAKER_1 (0:50)

I was reading on our market talk here. It was talking about maybe some of the folks now, because we sold off and there was a reversal, may have triggered a wave of short liquidations, which accelerated the move higher because we are seeing at 82,500 after breaking below 80,000. So a burst of short liquidations perhaps.

Is that sort of par for the course or a big deal?

Adam Lynch (1:16)

It certainly has been recently. We saw it happen when we popped up from 60k up to about 70 or so.

And then we sort of had the opposite happen when we were up at 87 Everybody was putting those levered long positions on and those got blown out. So yeah, it has been a little bit more volatile with this increased leverage that we've seen market participants using.

SPEAKER_1 (1:39)

But I'll tell you, the same person who wrote this, Lacey Zhang of Bigot Wallet was saying that demand for cryptocurrency and the outlook, the fundamental outlook for Bitcoin remains unchanged. Would you agree with that?

Adam Lynch (1:53)

Certainly, yeah, 100%.

I think we're continuing to just make more and more progress with Bitcoin, with Ethereum, with these other cryptocurrencies. So yeah, I would certainly agree with that statement. Bitcoin is strong, it's powerful. It's had some rough time periods here. We've had some withdrawals the last month or so. But if you zoom back, I mean, since January of 2024, Bitcoin ETPs have brought in nearly $60 billion of assets. So it's become a major player and something that definitely, I think, still has strong fundamentals for the future.

SPEAKER_1 (2:29)

As we think about adoption and regulation, legislation, what is it that you're watching here? Give us an update and also maybe a look ahead.

Adam Lynch (2:39)

Yeah. So obviously, we have crypto.

We have the Clarity Act fail for the overall crypto bill. That was a bit of a setback. We have seen progress though. Just about 10 days ago, the CFTC put forth a rulemaking process which is aimed at essentially tailored framework for certain crypto transactions. And then the SEC has been making noise about something else that they're going to advance, which is more of a digital asset framework. So it has been nice to see some progress there. Midterms could shake that up. We could see some changes there. But overall, I think from the legislative side of things, we're not going to be going anywhere, but from the regulatory standpoint, I think we will see progress. And that will hopefully help the market too.

SPEAKER_1 (3:22)

Well, let's talk about midterms here. Without getting political, I've had, you know, bipartisan guests here from both sides of the aisle saying that this administration has been crypto friendly. I think that's a good, fair way to say it. If the midterms flip what we see in Washington, could that then change the way or sentiment on crypto, maybe the way people invest in crypto?

Could we see a notable change?

Adam Lynch (3:52)

Potentially, we could. Yeah. I mean, I think that's a valid argument.

I would definitely agree that this administration has been probably the most pro crypto and crypto friendly that we've had. Were that to change, I think we could see some of this maybe grind to a halt. Maybe though, we could get maybe some bipartisan agreement. This has been a subject that they've tried really hard to get something done on. So I'm still somewhat optimistic, but yeah, we'll have to see what the numbers are like after these midterms.

SPEAKER_1 (4:26)

When we think about ICE and these big trading exchanges and such, of course, they talk about the next crypto trade could be tokenization of stocks and what's so great about it. What say you to that? Because that's certainly a key headline, something I've been discussing with some of the friends around here.