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October 2023: Rising Demand for Bitcoin as Digital Gold

Research Team
Last Update 11/01/2023
  • Bitcoin’s price surged in October, outperforming most traditional assets as well as other crypto assets. Grayscale Research believes that the appreciation reflects rising demand for digital gold and optimism about the prospects for spot Bitcoin ETF approval in the US market.
  • Grayscale recently introduced the FTSE Grayscale Crypto Sector Index Series to provide a rigorous framework for performance measurement and risk management in the digital assets industry. Over the last month, the FTSE Grayscale Currencies Sector Index was the star performer among the five distinct categories, while the Financials Sector Index was the weakest performer.
  • Technology stocks have been under pressure, but digital assets have so far bucked this trend—largely because of macro demand for Bitcoin, in our view. Crypto’s near-term outlook will depend on whether the decoupling from tech can continue.

Another down month for traditional assets

Many investors turn to gold to hedge their assets from potentially damaging tail risks, including monetary debasement and military conflict. Today, unfortunately, these risks need to be taken seriously. Traditional assets are struggling against a backdrop of heavy government bond issuance and active conflicts in the Middle East and Eastern Europe, and safe haven assets like gold and the Swiss Franc are benefiting as a result. In our view, Bitcoin is an alternative to physical gold that is being embraced for similar reasons by a digitally native generation; its  recent surge in price likely reflects rising demand for Bitcoin’s properties as digital gold, as well as the prospect of spot Bitcoin ETF approval in the US market, which would offer regulated access to Bitcoin to a wider range of investors.

October marked the third consecutive month of losses for both equity and bond markets (Exhibit 1). Since the end of July, the classic 60/40 equity and bond portfolio mix has lost roughly 8%, and the S&P 500 entered correction territory (a decline of at least 10%) in late October.[1] Other than short-maturity Treasury bonds, few traditional asset classes or sectors delivered positive returns during the month. Bitcoin gained 29% in October—underscoring crypto’s diversification benefits—and was one of the best performing major assets on both an absolute and risk-adjusted basis.

Exhibit 1: Bitcoin gained in October alongside traditional safe havens

Grayscale recently introduced the FTSE Grayscale Crypto Sector Index Series to provide a rigorous framework for performance measurement and risk management in the digital assets industry. Over the last month, the FTSE Grayscale Currencies Sector Index was the star performer among the five sector indexes, increasing about 20%, largely attributable to the sharp gain in the price of Bitcoin (Exhibit 2). The Financials Sector Index was the worst performer in October, held back in part by weakness in Uniswap’s UNI token (discussed further below).

Exhibit 2: Bitcoin’s gain supported the Currencies Crypto Sector Index’s return

Crypto outperformers included Bitcoin, Solana, and Chainlink

In addition to macro demand for Bitcoin’s properties as digital gold, we believe that Bitcoin has been supported by rising expectations for a spot ETF product in the US market. The Securities and Exchange Commission (SEC) declined to appeal the recent ruling in favor of Grayscale in the DC Circuit Court of Appeals. Grayscale’s 19b-4 filing now remains pending before the SEC, alongside other filings for spot bitcoin ETFs.

Bitcoin (BTC) again outperformed Ethereum (ETH) in October, and the ETH/BTC price ratio fell to its lowest level since mid-2021. Flows into existing exchange traded products (ETPs)—including futures-based products in the US and spot products in other markets—skewed strongly in favor of Bitcoin during the month. Grayscale Research estimates that Bitcoin ETPs received net inflows of $436bn in October, compared to net outflows of $15bn from Ethereum-focused products (Exhibit 3). Other market positioning indicators like futures open interest also pointed to rising demand for BTC compared to ETH.

Exhibit 3: Flows into crypto ETPs favored Bitcoin in October

In addition to increases in token prices, there have been other recent signs of a crypto recovery. For example, NFT (non-fungible token) trading volumes edged higher across major marketplaces (Exhibit 4). Volumes had previously been declining steadily following a wave of excitement around Bitcoin ordinals earlier this year, but rebounded in recent weeks. Also of note, Bitcoin Lightning Network capacity increased in October and aggregate stablecoin market capitalization moved up.[2]

Exhibit 4: NFT trading volumes edging higher

Through the lens of token pricing, the other standout performers last month were Solana and Chainlink—components of our FTSE Grayscale Smart Contract Platforms Index and FTSE Grayscale Utilities & Services Index, respectively. The SOL token increased 90% in October and is up 291% year-to-date.[3] After Bitcoin, Solana-focused ETPs saw the largest net inflows during the month. The rebound in prices and renewed investor interest could reflect the protocol’s robust operational performance—with only one network outage this year, compared to 14 last year[4]—and anticipation about the annual Breakpoint conference which began on October 30.

Chainlink’s LINK token has also enjoyed notable gains, increasing by 42% last month and 108% year-to-date.[5] The uptick appears connected to an improvement in on-chain activity, including 226 large holder transactions (defined as wallets that hold over $100k of LINK), more than $100 million in LINK leaving exchanges, and the existence of nearly 5,000 active addresses.

Separately, on October 17, Uniswap Labs implemented a fee for accessing the front-end interface of their decentralized exchange (DEX) for selected tokens (see our background report on the DEX industry). Uniswap is currently the second largest component of the FTSE Grayscale Financials Sector Index. The move sparked initial controversy, as some in the community questioned why the development team would impose such a fee while the governance token, UNI, still does not generate any fee income. Despite the initial pushback, the change has been financially successful for Uniswap Labs, and the protocol garnered approximately $562,000 in just 13 days.[6] This translates to a projected annual revenue of around $16 million. Although the UNI token experienced a temporary dip following the announcement, its price has since rebounded to levels seen prior to the fee switch.

Bitcoin at a crossroads

After the latest runup in price, Bitcoin sits at a crossroads. On the one hand, technology-oriented assets are under pressure from Federal Reserve tightening and other macro risks. Bitcoin and other crypto assets have been loosely correlated with technology stocks over the last few years, suggesting the latest drawdowns could spill over into digital assets if they were to continue.

On the other hand, Bitcoin’s core use case is as a non-sovereign money system and digital alternative to physical gold. Because of various risks around the world—including falling asset market valuations, vulnerable economies, and geopolitical tensions—demand for safe haven or “store of value” assets is rising. Bitcoin has benefited from these trends, in our view, as well as from expectations for spot ETF approval in the United States. For these reasons, Bitcoin’s correlation with technology-related equities has recently broken down (Exhibit 5). We think this decoupling can continue over the short-term, given the number of Bitcoin-specific positives. But if global asset markets continue to fall, it remains to be seen whether crypto can hold its recent gains.

Exhibit 5: Gold and Bitcoin rising while technology stocks fall


[1] Source: Bloomberg. Returns to the 60/40 portfolio measured with the Bloomberg Global 60:40 Index. The S&P 500 index fell 10.3% from July 31 to October 27. From July 21 to October 31 the cumulative drawdown for S&P 500 index was 8.6%.

[2] Source: Defi Llama and Glassnode.

[3] Source: Bloomberg.

[4] Source: Solana.com

[5] Source: Bloomberg.

[6] Source: Dune Analytics.


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The FTSE Grayscale Crypto Sector Indexes provides a comprehensive framework that allows you to measure the performance of the expanding crypto universe. The index series seeks to bring clarity to this rapidly evolving asset class by identifying five distinct sectors that can be used as a roadmap to navigate the digital asset universe. The S&P 500 Index is a market-capitalization-weighted index that measures the performance of 500 of the largest publicly traded companies in the United States. The S&P Goldman Sachs Commodity Index is a composite index of commodity sector returns representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. The Barclays Global Aggregate Index is a market-weighted index of global government, government-related agencies, corporate and securitized fixed-income investments. The Advanced Research Risk Parity Index tracks the performance of a multi-asset strategy that balances risk equivalently among four broad asset classes: global equities, commodities, U.S. Treasury Inflation-Protected Securities (TIPS) and U.S. Treasury Futures. The MSCI World ex USA Index captures large and mid cap representation across 22 of 23 Developed Market countries, excluding the United States. Global Aggregate Bond Index is a broad-based fixed-income index used by bond traders and the managers of mutual funds and exchange-traded funds (ETFs) as a benchmark to measure their relative performance. The MSCI Emerging Markets Index is designed to measure the financial performance of companies in fast-growing economies around the world and tracks mid-cap and large-cap stocks in 25 countries. The Bloomberg-Barclays 60/40 index is designed to measure cross-asset market performance globally. The index rebalances monthly to 60% equities and 40% fixed income. The Renaissance IPO Index (IPOUSA) is a stock market index based upon a portfolio of U.S.-listed newly public companies that include securities prior to their inclusion in core U.S. equity portfolios. You cannot directly invest in an index.

This content does not constitute a recommendation or take into account the particular investment objectives, financial situations, or needs of investors. 

Investors are not to construe this content as legal, tax or investment advice, and should consult their own advisors concerning an investment in digital assets. The price and value of assets referred to in this content and the income from them may fluctuate. Past performance is not indicative of the future performance of any assets referred to herein. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. 

Certain of the statements contained herein may be statements of future expectations and other forward-looking statements that are based on Grayscale’s views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those expressed or implied in such statements. In addition to statements that are forward-looking by reason of context, the words “may, will, should, could, can, expects, plans, intends, anticipates, believes, estimates, predicts, potential, projected, or continue” and similar expressions identify forward-looking statements. Grayscale assumes no obligation to update any forward-looking statements contained herein and you should not place undue reliance on such statements, which speak only as of the date hereof. Although Grayscale has taken reasonable care to ensure that the information contained herein is accurate, no representation or warranty (including liability towards third parties), expressed or implied, is made by Grayscale as to its accuracy, reliability, or completeness. You should not make any investment decisions based on these estimates and forward-looking statements. 

There is no guarantee that the market conditions during the past period will be present in the future. Rather, it is most likely that the future market conditions will differ significantly from those of this past period, which could have a materially adverse impact on future returns. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. We selected the timeframe for our analysis because we believe it broadly constitutes the most complete historical dataset for the digital assets that we have chosen to analyze.

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