October 2026 Market Commentary

Tech Selloff, Oil at Six-Month Highs and a Record Exchange Theft

October was a risk-off month for growth assets. The Nasdaq 100 fell 6.7%, bitcoin lost 7.4%, and ether 16.0%, while Brent crude rose 13.6% to its highest settlement since the end of April. The S&P 500 held up better, slipping just 0.9%, but it and the Nasdaq 100 finished the month at their October lows after a late selloff in technology shares.

Three developments set the tone. The Federal Reserve held rates on Oct. 28 but signaled a bias toward tightening, with two dissents in favor of a hike. Disappointing results from Intel and Amazon on Oct. 30 added to worries about AI spending, and the Nasdaq Composite had its largest one-day drop since June 5. In crypto, Binance lost roughly $6.3 billion in the largest theft on record, an event the market largely absorbed.

Elsewhere, gold fell 6.8% and Treasury yields declined across the curve, with the 10-year down about 36 basis points to 4.93%. The dollar index edged up 0.4%, and the VIX rose 3.08 points to 19.42.

001 Cross-Asset Backdrop: A Hawkish Fed Hold, Oil Near $118 and an AI Spending Selloff

On Oct. 28, the FOMC kept the Federal Funds target range at 3.75%-4.00%, where it has been since a quarter-point increase in September. The vote was 10-2, with Governor Lisa Cook and Cleveland Fed President Beth Hammack dissenting in favor of a 25-basis-point hike. The committee’s statement said economic activity is expanding at a strong pace, an upgrade from "solid" in September, and that inflation remains elevated. The stated reason for waiting was that more information will help central bankers determine the appropriate policy stance. The statement also left room for further hikes depending on inflation, and after the decision Fed Funds futures implied an 85.7% probability of a 25-basis-point hike at the Dec. 9 meeting.

Growth indicators were consistent with that description. The Atlanta Fed's GDPNow tracke, a “nowcast” rather than an official release, pointed to 3.4% annualized growth in the third quarter, and the Fed's preferred inflation gauge came in above 3% on a year-over-year basis for September on headline and core measures. Chair Kevin Warsh also announced that one 2027 FOMC meeting will be devoted to monetary policy strategy, without the traditional rate vote or statement.

Oil was the month's strongest major market. Brent rose 13.6% and WTI 15.2%. The month-end Brent level of $117.64 is the December contract, which expired on Oct. 30 after settling up $2.76; the January contract settled at $113.43. The supply picture deteriorated through the month. On Oct. 30 a tanker in the Strait of Hormuz was hit by limpet mines, the first known successful strike of its kind in the strait since the U.S.-Israeli war with Iran began in February. October was the deadliest month for attacks on commercial vessels since the war began, with 32 recorded incidents as of Oct. 30, and freight costs reached as much as $40 a barrel, about 10 times the usual rate. Observed inventories fell 10 million barrels in September, leaving global stocks 509 million barrels below pre-war levels. Physical flows were holding up: Gulf crude exports averaged 24.6 million barrels per day in the week ended Oct. 18, above the pre-war average. The Oct. 30 gain came amid concern about a possible escalation in the Iran war after the U.S. midterms, and Brent for October 2027 delivery traded above $90 the same day.

Equities peaked early in the month. The S&P 500 and the Nasdaq 100 set their October closing highs on Oct. 6 and closed the month at their October lows after a sharp late-month decline. Alphabet shares had their worst day on record on Oct. 29, falling more than 12%. On Oct. 30, Intel shares fell 28.6% after weaker-than-expected guidance, and Amazon reported a third-quarter miss on revenue and earnings while keeping its 2026 capital expenditure forecast at $220 billion. The results added to concerns about how much AI companies are spending. The Nasdaq 100 fell 3.46% that day and the S&P 500 1.82%, the largest daily declines of the month for both; the broader Nasdaq Composite fell 2.86%, its largest drop since June 5. The chips index lost 7.2% on the day, bringing its October decline to more than 15%, and the S&P 500’s technology sector posted its largest monthly loss since March 2025. Earnings in aggregate remained strong: analysts expected third-quarter S&P 500 earnings growth of 31.6% from a year earlier, with 82% of the 299 companies that had reported beating consensus forecasts.

Treasury yields and gold fell. The 10-year Treasury yield closed at 5.30% on Oct. 5, its October high, and finished the month at 4.93%, down 35.6 basis points. The 2-year note fell 29.94 basis points to 4.59% and the 30-year bond 32.04 basis points to 5.31%. The largest one-day declines across the curve came on Oct. 22, when the 10-year fell 16.6 basis points. Gold set its October high on October 9, then fell 2.80% on October 22 and 3.65% on October 30 to close the month down 6.8% at its October low. With gold and yields giving back early-October highs, the declines read as a degree of mean reversion. The dollar index rose 0.4% and the VIX finished at 19.42, below its Oct. 16 high of 19.99.

002 Bitcoin and Ether: Performance, ETF Flows, and Positioning

Bitcoin fell 7.4% in October, from $83,621 to $77,423, and was down 11.7% year to date. It traded between a closing high of $85,820 on Oct. 4 and a low of $76,782 on Oct. 30. The largest one-day move was a 4.07% decline on Oct.qq 22, the same day as the month's biggest moves in rates. Ether fell further, losing 16.0% to $2,252 and leaving it down 24.4% for the year. Both remained more volatile than equities: October annualized realized volatility was 28.2% for bitcoin and 39.8% for ether, against 22.5% for the Nasdaq 100 and 11.6% for the S&P 500. Crypto month-end figures use the Oct. 31 close, because the market trades every day; traditional assets use Oct. 30.

U.S. spot bitcoin ETFs had net outflows of $515.9 million in October across 22 trading days. Flows were positive on 13 days and negative on nine, and the month was net positive by $127.3 million through Oct. 29. A $643.2 million net outflow on Oct. 30, the largest of the month, turned the total negative. The largest inflow days were Oct. 19 ($526.7 million) and Oct. 21 ($524.8 million), with a $635.6 million outflow on Oct. 22 in between. Dispersion across funds was wide. IBIT took in a net $932.1 million while FBTC lost $754.5 million, ARKB $444.0 million and GBTC $184.0 million.

Ether ETF flows were weaker and more one-directional. U.S. spot ether ETFs had net outflows of $1,607.2 million, with outflows on 19 of 22 trading days. ETHA, BlackRock’s ether ETF, accounted for $1,420.5 million of the outflows and Grayscale’s ETHE for $119.1 million, while Fidelity’s FETH took in $36.0 million. The flows coincided with spot ether's 16.0% decline for the month.

Positioning data adds context on who holds the exposure. Asset managers' net long in CME bitcoin futures fell from 43.3k BTC in the week of the all-time high to 18.4k BTC, a 57% decline. The CME front-month basis averaged 4.8% annualized in the 30 days to Oct. 21, only 0.6 points over three-month Treasury bills, a narrow pickup for the cash-and-carry trade of holding spot ETFs against short futures. Consistent with that, 13F filings suggest basis traders and macro funds were selling spot ETF holdings while wealth platforms and sovereign funds bought. 13F-reporting institutions held 355k BTC-equivalent of spot bitcoin ETFs at the September 2025 quarter-end and 307k by June 2026, a 14% decline, though 13F data lag and show positions, not intent. Spot ETFs have added 87k BTC since the June 2026 low, and bitcoin digital asset treasury companies held at least 1.073 million BTC, including 848,500 BTC at Strategy.

003 Binance Theft: Largest on Record, Contained Market Reaction

Binance was drained of roughly $6.3 billion across 10 blockchains on the night of Thursday, Oct. 29, in the largest theft ever recorded. The attack has been linked to TraderTraitor, a North Korean unit tied to the Lazarus Group. Binance's preliminary finding was that a compromised DevOps engineer's laptop gave the attackers access to a service container, with no evidence that any wallet private key had leaked. On Nov. 1, Binance had not re-enabled withdrawals.

Issuers of centralized stablecoins can freeze tokens held at specific addresses, and several did so with the stolen funds. Tether froze about $1.77 billion worth of USDT, Circle about $825 million of USDC, Ripple about $40 million of RLUSD and World Liberty about $28 million of USD1, putting total freezes at $2.5 billion to $3 billion. Binance said it will cover all losses from its $1.2 billion SAFU fund and from company funds. Net of freezes, the loss equals roughly one year of BNB burns, or about 4% of the roughly $144 billion in assets Binance held before the attack, though Binance's financial condition cannot be independently verified.

The market largely shrugged off the theft. Bitcoin traded at $77,065 around 1:34 p.m. ET on Oct. 30, down about 4% intraday, against an average 8.3% decline in the first 24 hours after past exchange exploits; its daily close that day was down 2.55%. Crypto-related equities Coinbase, Strategy and Robinhood fell 7.2% to 10.6% on Oct. 30, the same day as the broad technology selloff, so the hack's specific contribution to those moves cannot be separated.

The theft followed a run of operational failures in the third quarter. Attackers stole $387.5 million from Bitget's hot and warm wallets on Sept. 24, in an attack the exchange linked to North Korean actors, and Bitget covered the full loss from its protection fund. At least $91 million was stolen from customers who bought Ledger devices from the reseller CryptoBilis, and third-quarter hack losses ran between $1.1 billion and $1.3 billion. In each major recent incident, the cryptography held; the failures were in implementation, supply chain or operations.

004 Market Structure and Regulation: CFTC Rulemaking, Tokenized Stocks and ICE's Hyperliquid Deal

CFTC Chairman Michael Selig unveiled Regulation CTX and Regulation CAM in a 108-page advance notice of proposed rulemaking, which is not yet a proposed rule. The notice indicates that "actual delivery" of crypto may require the purchaser to possess the private keys. Comments are due 60 days after publication in the Federal Register. The CFTC currently has a single commissioner, and agency rules can be reversed by a future administration. Separately, a CFTC pilot now allows bitcoin, ether and USDC to serve as derivatives collateral.

At the SEC, work continues on the innovation exemption set out on Sept. 17. The exemption would create Tokenized Securities Venues (TSVs) that can trade tokenized securities outside Regulation NMS, and would be subject to KYC requirements, volume limits and trading halts. The framework is still in progress, with SEC staff continuing to answer and clarify FAQs. At least three entities, Canton (TSV LLC), Perpetuals.com and OKXICE, have notified the SEC that they intend to launch a TSV. Issuers have pushed back: at least 16, including Microsoft, Apple, Google and Goldman Sachs, notified OKXICE TSV that they object to their stocks being tokenized. The SEC also proposed custody rules that would let state trust companies hold crypto for investment advisers and funds. Separately, SEC staff revised their crypto asset FAQs on Sept. 28 to condition the answer on token buybacks on the system having no central party; staff FAQs carry no legal force.

ICE, the parent of the NYSE, announced a definitive agreement with trade[XYZ] to bring Hyperliquid perpetual futures to the U.S., pending regulatory approval, with ICE as exclusive operator and a strategic investor. Separately, on Oct. 26, Hyperliquid announced that Payward, Kraken's parent, plans to be the first CFTC-regulated deployer on HIP-3* (the regulatory-friendly version of HIP-3, hence the asterisk). The HYPE token rose about 20%, from $78 to $94, on the ICE announcement. Neither arrangement has launched.

Other institutional developments during October:

• DTCC went live with a tokenization service on Canton and Besu.

• Citadel Securities and BNY entered a tokenized Treasury repo deal.

• BlackRock filed for a bitcoin ETF offering downside protection with upside exposure to IBIT.

• Onchain real-world assets grew from about $28 billion to $39 billion over the past year, and tokenized stocks from $650 million to nearly $3.3 billion.

• The OCC's final GENIUS Act rule leaves the door open for certain stablecoin rewards, and the GENIUS Act stablecoin framework is on track to take effect in January 2027.

005 Our Takeaways and Predictions

The Fed's Dec. 9 decision is the central macro event ahead. Markets priced an 85.7% probability of a hike after the October meeting, and the statement left the door open to further increases depending on inflation, which puts weight on the October CPI and PCE data due in November and on the minutes of the October meeting. Oil adds to that inflation risk, with Brent for October 2027 delivery trading above $90 at month end. For equities, the open question is whether strong reported earnings, with analysts expecting 31.6% third-quarter growth for the S&P 500, can offset the AI-spending concerns that accompanied the late-October selloff.

In crypto, the nearest milestones are regulatory. The CFTC is taking public comments on Regulation CTX and Regulation CAM through Dec. 14, ICE's Hyperliquid arrangement still requires regulatory approval, and the GENIUS Act stablecoin framework is on track to take effect January 2027.

Key Macroeconomic Data Releases:

• Nov 10: U.S. October CPI, headline and core month over month, 8:30 a.m. ET. The BLS is not scheduled to publish October year-over-year CPI data.

• Nov 13: U.S. October PPI, 8:30 a.m. ET.

• Nov 17: U.S. October retail sales, 8:30 a.m. ET, and industrial production, 9:15 a.m. ET.

• Nov 18: Minutes of the October FOMC meeting, 2:00 p.m. ET.

• Nov 25: Second estimate of third-quarter GDP and October personal income, spending and PCE prices, 8:30 a.m. ET; Federal Reserve Beige Book, 2:00 p.m. ET.

• Dec 9: FOMC decision

To learn more about the topics covered in this month's newsletter, contact our team or reach out to your Galaxy representative.

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