First Mover Asia: Does Crypto’s Success Depend on the Upcoming Presidential Election?

Good morning. Here’s what’s happening:

Prices: The post-debt ceiling rally in the crypto market has ended, with bitcoin and ether declining in East Asia. What’s the next narrative for crypto?

Insights: The latest Commitment of Traders reports shows a rebound in open long positions among asset managers.

Looking for the Next Pricing Narrative

Yesterday’s post-debt ceiling deal rally has come to an end.

Bitcoin is beginning East Asia’s trading day down 1.3% at $27,746 while ether is down 1.1% to $1,893.

In the last few weeks, crypto has struggled with a narrative problem. The absence of a defining narrative – is it a risk asset, or a hedge against risk? – has made for patternless price swings and confused investors.

Some might say, for instance, that bitcoin should have risen on debt ceiling uncertainty, as a U.S. default would have jolted the traditional financial system. But instead, bitcoin acted like a stock. Perhaps crypto’s narrative is no narrative at all.

Ed Moya, a Senior Market Analyst with foreign exchange market maker OANDA, posits that the upcoming U.S. election is the narrative to watch.

“We were reminded that the key to Bitcoin’s success in the US might depend on the upcoming presidential election,” Moya wrote in a note Friday. “Florida governor Ron Desantis announced his intentions to run for president and appears poised to ‘protect’ Bitcoin.”

With Central Bank Digital Currencies being a new wedge issue in Florida’s political landscape, the national stage is the next logical step. Crypto has come up in elections worldwide, such as South Korea and Thailand, and President Joe Biden mentioned it when discussing debt deal negotiations.

Maybe this will be the narrative to watch?

Funding Rates Remain Positive in Crypto Markets

The Commitment of Traders report shows that asset managers have increased their open long positions in bitcoin after falling in the two prior weeks. The 24-contract increase follows a reduction of 162 contracts the week prior.

The increase halts what appeared to be more of an overall reduction in exposure than a commentary on price itself. Asset managers reduced their short positions as well over the identical time period by a total of 194 contracts.

The Commodity Futures Trading Commission (CFTC) releases COT data weekly, detailing the open interest and activity of asset managers, leveraged funds, and dealer intermediaries in bitcoin futures.

Asset Managers now comprise 48.9% of open long positions on the Chicago Mercantile Exchange, and are 97.25% long the asset as a group.

“The Hash” hosts weighed in on the biggest stories shaping the crypto industry today. The number of ether (ETH) on exchanges hit a low not seen since July 2016 as staking saps up available ether. Separately, the potential sign that good-economic-news-equals-bad-news for digital asset prices narrative is beginning to shift. Plus, the lawyer representing some FTX investors, Adam Moskowitz, joined “The Hash” to discuss basketball legend Shaquille O’Neal being served in a class action lawsuit regarding FTX and its celebrity endorsements.