Insights from October’s Market Movements
Alex Thorne, who leads research at Galaxy Digital, believes that the recent disruptions in October haven’t disrupted the market cycle.
According to Thorne, the slide that began on October 10 was triggered by high leverage issues impacting thin order books. This situation worsened as exchanges’ automated deleveraging limited short selling by some market makers, which, unfortunately, reduced liquidity precisely when it was most needed. He highlighted that around $19 billion in liquidations occurred as Bitcoin dropped from approximately $126,300 on October 6 to an intraday low near $107,000, while Ethereum fell from about $4,800 to around $3,500 before the market settled over the weekend.
Macro concerns have reemerged, and investor risk appetite appears to be waning again. Thorne pointed to weak performances in semiconductor stocks, a more hawkish stance from the Federal Reserve, renewed concerns from local banks, and geopolitical tensions. He observed that classic risk-off indicators have solidified their trends, including gold and silver setting new highs and the 10-year Treasury yield dipping below 4%.
Thorne also mentioned potential negative repercussions specific to cryptocurrencies, noting that digital asset treasury firms are cooling off. With stock prices in decline across this sector, there may be less buying activity that isn’t sensitive to price fluctuations, which could heighten short-term vulnerabilities, even after the market has adjusted from its initial shocks.
Despite these short-term challenges, Thorne is optimistic about the medium-term outlook. He identified three main factors that could fuel the next growth phase.
The first is capital investment in AI. He views this current wave not merely as a speculative repetition of the dot-com bubble but rather as a legitimate capital spending cycle driven by well-funded established companies like hyperscalers, semiconductor makers, and data center operators. This trend is likely bolstered by substantial support from U.S. policies, suggesting a long runway ahead.
The second factor is stablecoins. Thorne noted that dollar-pegged tokens are increasingly becoming a preferred payment method, with broader adoption, enhanced liquidity, and heightened activities on public blockchains. He believes these underlying dynamics can sustain the ecosystem, especially amid price volatility.
The third is tokenization. Thorne pointed out that the integration of real-world assets and segments of traditional market infrastructure onto blockchain technology is transitioning from experimental phases to actual implementation. This shift is generating new demand for block space and the core assets needed to safeguard, route, and settle these transactions. He believes that platforms aligned with this movement will reap significant benefits.
In this context, even amid skepticism surrounding fiscal and monetary policies, Thorne remains hopeful about Bitcoin, referring to it as “digital gold.” He also sees a positive environment for major cryptocurrencies like ETH and SOL, especially regarding stablecoin usage and tokenization—though there’s a possibility of the short-term bullish trend faltering below historical peaks.
The immediate takeaway is to be cautious—acknowledging the diminished liquidity and the prevailing “wall of worry” sentiment. However, on a more optimistic note, he emphasized resilience, suggesting three tailwinds that should help maintain an upward trajectory post-market adjustments.
