Geopolitical Tension Triggers Sell-off

The crypto market has seen notable volatility this week, with Bitcoin reaching a two-month high before a sharp sell-off triggered by geopolitical tensions in the Middle East. On September 27, Bitcoin ETFs recorded $494.4M in net inflows, one of the highest daily inflows since their launch. The recent rally was primarily driven by strong U.S. job data and anticipated stimulus measures from China, highlighting Bitcoin's growing sensitivity to global macroeconomic conditions. However, today's downturn reflects the impact of escalating tensions between Israel and Iran, demonstrating Bitcoin's responsiveness to geopolitical events.

Weekly Price Update

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Fear-Driven Markets

The recent missile attacks from Iran have heightened fears of a larger-scale conflict, leading to market volatility. Historically, when similar geopolitical events have caused temporary market downturns, often that end up being fear driven overreactions. If tensions between Iran and Israel don't escalate further, it's likely we’ll see a strong recovery. There are still bullish catalysts on the horizon for both global markets and crypto, such as recent rate cuts, the potential for more cuts, and the upcoming U.S. election, which we think will all contribute to more positive momentum.

Where Crypto Voters Sit

Voters are currently split on crypto policy between Democrats and Republicans, with Consensys reporting 35% of respondents trust Republicans more, while Grayscale finds 34% think Republicans favor the industry compared to 33% for Democrats. Interestingly, Coinbase’s survey shows an even divide among crypto owners, with 47% planning to vote for Kamala Harris and 47% for Donald Trump.

Across the board, crypto owners are calling for clearer regulations, with 72% saying they would get more involved if the rules were clearer, according to Coinbase, and 44% believing the government is doing too little to support the industry (Consensys). Meanwhile, 81% of voters also believe regulators should oversee emerging tech.

Crypto is also shaping up to be a potential swing issue, with 59% of Michigan voters favouring a free market approach, and one in eight crypto owners living in swing states. According to Coinbase's survey, 67% of crypto owners in swing states are more inclined to vote for a candidate who is proactive about crypto. Additionally, 78% of all crypto owners surveyed indicated they would likely support the candidate most knowledgeable about crypto. This underscores the growing importance of crypto clarity and acceptance in the upcoming election, explaining why candidates are increasingly adopting a proactive stance on the industry.

Kamala Harris Advocates U.S. Blockchain Dominance

Kamala Harris has emphasised the importance of the U.S. taking a leadership role in blockchain, AI, and other emerging technologies. During a Wall Street fundraiser in Manhattan she highlighted her vision of creating an "opportunity economy" where innovation thrives under clear and consistent regulatory frameworks.

This marks a shift in her campaign, which had been relatively quiet on digital assets until recently. By linking blockchain and digital assets to national competitiveness, Harris aims to ensure that the U.S. leads the global race in key technologies, particularly in the face of competition from China.

Ethereum Transaction Fees Surge with Growing Network Activity

The Ethereum network has seen a significant spike in transaction fees due to increased blockchain activity. This rise highlights Ethereum's expanding ecosystem, as more users and applications interact with the platform, particularly in areas like DeFi and NFTs. However, the surge in fees raises concerns about the network's scalability and could renew interest in Layer 2 solutions to manage congestion.

Base has been the best performing Layer 2 solution on Ethereum and has reached all time highs in both Total Value Locked (TVL) and network activity. Last week Base reached a high of 61.8 transactions per second, which is 3x more than any other Ethereum rollup.

ETF Milestones

BlackRock's Spot Ethereum ETF surpassing $1 billion in assets marks a major milestone, highlighting strong institutional interest in Ethereum and its evolving role as critical infrastructure for decentralised applications. Meanwhile, U.S. Bitcoin ETFs are experiencing their best performance since mid-July, driven by favourable market conditions and renewed interest from institutional investors. Both developments underscore the increasing mainstream acceptance of crypto assets and suggest potential for greater institutional inflows into the market, boosting overall liquidity and stability.

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