Investors rattled by market crash
In the financial markets, steep losses can lead to frustration among investors. Under these circumstances and with this state of mind, it's tempting to write off the bull market. But is that really justified? In this edition of the weeklyĀ Market News, we look at the long-term trend, and at Luxembourg, a small country that's sending a big message.
Market update
In the days leading up to the crash on Friday, October 10,Ā Bitcoin was trading above ā¬100,000. On Monday, October 6, we even saw an all-time high of ā¬107,500. It would have been great if the market had recovered quickly after the crash and left a nice V-shape on the chart, but that didn't happen.
Instead, the prices of most tokens stayed around the levels seen immediately after the crash. Bitcoin fell back to the lower end of the price range itās been in for most of this year. This is disappointing, especially since gold rocketed to new record levels last week, and the US small-cap index, the Russell 2000, also broke records.
Among crypto investors, this led to frustration and gloom, but a bit more patience is the order of the day. After a crash like the one on October 10, a market needs time to catch its breath. Investors assess their losses and either reduce their positions or buy more. It takes time for confidence and risk appetite to return.
The weekly chart shows the long-term trend, and there's nothing wrong there. The trend is still upward, and the price remains above the dominant moving average. This fits the base case that the bull market is still intact, and the pattern of higher highs and higher lows continues.
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Luxembourg buys Bitcoin through state fund
Luxembourg has become the first country in the eurozone toĀ invest in Bitcoin through a state fund. The intergenerational fund FSIL, set up to allow future generations to benefit from budget surpluses, is investing 1% of its assets in Bitcoin ETFs. This is estimated to be worth ā¬8-ā¬9 million.
The investment itself is small, but the signal it sends is significant. For the first time, a European government has recognized Bitcoin as part of an official long-term strategy. This move follows a legislative change earlier this year that gives FSIL more leeway to invest in "alternative assets," including digital assets. The fund, which has primarily focused on bonds and equities until now, aims to prepare for a future in which digital assets also play a role.
According to Bob Kieffer, director of the Luxembourg Treasury, this shows that the country is committed to regulated digital innovation. InĀ a post on LinkedIn, he calls the move recognition of āthe growing maturity of this new asset class." Luxembourg explicitly wants to position itself as a European hub for the regulated fintech market.
The 1% Bitcoin allocation may seem minimal, but it was a deliberate choice. "Some might argue that weāre committing too little, too late," writes Kieffer, but "ā¦a 1% allocation strikes the right balance, while sending a clear message about Bitcoin's long-term potential.ā
Internationally, Luxembourgās decision has attracted attention. The country is known for being conservative and financially stable, with a large financial sector and a preference for regulated innovation. If a country like that includes Bitcoin in its state fund, it could prompt other European countries to reconsider their stance.
For now, it's mainly a symbolic move ā but one that's hard to ignore.
In other news
Bitwise sees financial advisors moving toward crypto.Ā According to the fund manager, the topic of crypto now comes up in every client conversation. Investment advisors are seeingĀ interest from clients of all ages, and even capital movement from large-cap stocks like Apple and Nvidia to Bitcoin andĀ Ethereum. According to Bitwise, crypto now represents 1% to 15% of many portfolios.
U.S. Bank launches new crypto division.Ā America's fifth-largest bankĀ is creating a division focused on stablecoins, tokenization and digital payments. Through its newĀ Digital Assets & Money MovementĀ division, U.S. Bank aims to accelerate the issuance and custody of digital assets. Once again, a major player is making it clear that crypto assets are no longer a niche, but part of mainstream banking.
Ripple Labs seeks to raise $1 billion for an XRP treasury.Ā The company plans toĀ set up a fund through a SPAC to hold and manage XRP, partly backed by its own tokens. The timing could be better: the performance of shares in so-called treasury companies has been disappointing lately, making investors cautious. Nevertheless, Ripple is persevering, aiming to position XRP as a serious corporate reserve asset.
Ethereum remains developersā favorite.Ā According to new data from Electric Capital, Ethereum attracted more thanĀ 16,000 new developers this year, more than any other network. This is striking, as the number of developers working in the crypto space has declined globally. According to Electric Capital, Ethereumās combination of mature tools, strong community, and vibrant layer-2 networks makes the ecosystem more attractive than ever.
Satoshi Radio: TheĀ latest episode of Satoshi Radio takes an in-depth look at the market crash from a week ago. Bitcoin fell 16 percent, and some altcoins nearly hit zero. What happened? And what's the outlook? Besides answers to these pressing questions, you'll get a tour of the most important news, including a large bitcoin seizure in the US and a ācostlyā mistake by stablecoin issuer Paxos.
This article is for informational purposes only and does not constitute a marketing communication or recommendation. None of the content herein should be considered as investment advice or a substitute for it. Bitvavo makes no guarantees regarding the accuracy or completeness of the provided information. Investments involve risks. There is a possibility of losing your entire invested capital.