October is a historically strong month for bitcoin, but the price action this month has been strangely weak
by James · October 20, 2022
The month of October, celebrated as “Uptober” by longtime crypto investors, has historically produced some big gains for bitcoin. In seven of the last 10 years, bitcoin has posted a positive month. It most recently achieved a 40% increase in 2021, after posting 28% and 10% increases in 2020 and 2019, respectively. That’s according to spot exchange closing prices tracked by data provider CryptoQuant. In four of the last six years, ether has ended the October trading month higher, according to Kaiko. This October, however, price action has been weak. Bitcoin hasn’t meaningfully broken out of the $19,000 level in weeks, and with crypto in a bear market, the possibility of posting a losing October is greater than usual. Bitcoin was lower for the month by 0.3% as of Tuesday, while ether was down 1.4%, according to Coin Metrics. “Volatility in the crypto market has fallen to multi-year lows over the past month, with bitcoin’s 20-day volatility now equal to that of the Nasdaq stock index,” Kaiko head of research Clara Medalie told CNBC. “During October, bitcoin breached $20,000 only once on the 6th, before retreating, at one point falling below $18,000,” she added. “Overall, daily trading volumes in October are on average less than what was observed last October, which was the month before bitcoin broke all-time highs above $60,000.” Katie Stockton, a chart analyst and founder of Fairlead Strategies, said bitcoin is retesting its 50-day moving average and added that she remains bearish in the medium term – citing increased risk of a breakdown that could take bitcoin to near 13 900 dollars. Despite oversold conditions, long-term momentum remains negative, she said, noting that there is no evidence yet of a long-term low. Macro risk and retail investors. The price action may feel a bit firm to some, but many are celebrating bitcoin’s relative stability and have noted that while the stock average fell again to test its summer lows, bitcoin held steady – even though it was 70% below its. November all-time high. Part of the reason for the uncharacteristic and consistently low volatility of late is that crypto traders started pricing in Federal Reserve interest rate hikes earlier than stock investors did, according to Greg Magadini, CEO of Genesis Volatility. “Crypto had its meltdown back in May and June,” he said. “Cryptospace has been at the forefront and is now taking a breather, while stocks are now having their moment to worry about federal rate hikes.” Bitcoin’s better results in the first and third quarters of the year have also helped to validate the idea that the spring crypto crash was primarily a result of the fallout from the Terra project and the contagion that spread to Three Arrows, Voyager, Celsius and others. Some are beginning to wonder if bitcoin may be at the beginning of its decoupling from stocks, which many trace back to the beginning of the year, after institutional investors began entering the market and the Fed introduced its rate hike plan. It remains to be seen how cryptocurrencies, which are currently flat for the month, will end October. Investors are looking for a new use case or catalyst to bring new interest to crypto, but many have come to terms with the fact that crypto is largely macro-driven for now. “Crypto may be more sensitive to long-term returns creeping somewhat higher than they are right now,” said Callie Cox, US investment analyst at eToro. “While the stock market may find some momentum in a better-than-expected earnings season, crypto may be held down by the belief that a resilient economy may encourage the Fed to swing the hammer harder. Interest rate sensitivity has been a major differentiator in sector and asset class returns of late. ” She also added that despite the wave of institutional investment that has hit the market this year and last year, cryptocurrencies are still largely retail-driven and therefore more sensitive to retail investors looking to de-risk their portfolios this year. “We haven’t seen a lot of that yet, but we’re seeing investors getting more defensive because they’re increasingly worried about the economy,” Cox said. “People invest when they have cash on hand, and if retail pulls back on investing because they need to pay bills or build an emergency fund, we can see the repercussions in riskier markets like crypto.”
