Traditionally seen as a strong bullish month for Bitcoin and digital assets, October has, so far, been synonymous with dead calm. But certain aspects such as the macroeconomic or geopolitical context could emerge from the storm. Unless it’s something more specific to Bitcoin like the monthly shutdown that sets things on fire. Here are some things to consider this week around the world’s largest crypto asset.
Has Bitcoin become a stablecoin?
Due to very low volatility in recent weeks there have been ironically some references to Bitcoin as the new stablecoin. In recent weeks, the mother of cryptocurrencies has even shown more stability than some fiat currencies. A peak! As shown in the following chart, taken from the Tradingview platform. Graph showing the weekly close of Bitcoin since the beginning of the year:
Over the past 6 weeks, the market has been completely calm as shown by the extremely flat candles. For those committed to a major movement, up or down, this peace would only strengthen the amplitude of the movement to come. With the basic idea that the power of the movement could be channeled throughout this crossing of the desert. In other words, the longer Bitcoin stays, the more powerful the move is likely to be.
Although a very volatile month for Bitcoin price, October (also known as “Uptober” by cryptophiles) is very disappointing right now. Some predict the move could settle in November. Either way, the bulls seem to have their work cut out for them, as the asset remains locked below the $20,000 resistance for several sessions.
For Michaël Van de Poppe, the founder of the trading company Eight, Bitcoin is about to experience a major movement. He recently told these followers:
The week ahead is a big one with all the events taking place, it’s almost inevitable that this streak will come to an end. I look at this last resistance. She has to break, and then the party can begin.
An opinion more or less shared by the trader and analyst Jackis who predicted for himself, a “wild” month in November for Bitcoin. With a strong return to volatility. However, Jackis does not specify whether the movement will be bullish or bearish.
Uptober doesn’t keep its promises!
Although the price of Bitcoin increased by almost 40% in October 2021, the vintage of 2022 is not so good. With a loss of 0.36%, October could see Bitcoin post losses for the third time in the last 10 years.
The table below shows October’s underperformance compared to other years:
The importance of the FED and the ECB!
For weeks, the crypto market has been fueled and guided by the monetary policies of central banks. Themselves as a result of the figures of the real economy. On October 28, the market could respond to the publication of the CTP index in the United States for the month of September. If this index, which details personal consumption expenditure, is less influential than the CPI, the date of publication could reinforce its influence.
In fact, the following week, the FED must meet again to decide on new rate hikes to come. No one doubts that the federal institution will take the CTP index figures into account in its decision. While the market is expecting another 75 basis point hike, there are already rumors that the Fed’s stance may be reduced. If so, this could add to risk markets. Anyway, cryptic James Bull strongly believes in this theory:
We are in the 11th month and the FED is considering stopping the rise in interest rates.
The analyst also notes that the bearish market around Bitcoin lasts an average of 12.5 months. It started last November, so we would be close to a low point according to this theory. For his part, Charlie Bilello, CEO of Compound Capital Advisors, estimates that the rate cuts will start in December and accelerate from the beginning of 2023.
Either way, the current consensus seems to be for another 75 basis point rate hike. As shown in the diagram below:
But it is interesting to note that the consensus is moving towards a more rational increase. If 7% of economic actors expect a rise of 50 basis points, only 2% of them were to imagine this result a week ago.
At European level, the ECB will hold a press conference next Thursday. As for the Old Section, it also seems that the market is expecting a rate hike of 75 basis points. In some member countries of the Union, inflation has reached peaks. More than 20% in some places.
The hash rate could play a crucial role!
Despite the bearish market and the drop in the Bitcoin price, the hash rate continues to explode. An increase in the hash rate, which measures the computing power of the entire network, means that miners are devoting more and more computing power to the blockchain.
In a context where margins were already low, they are reduced even more. For many small miners, the situation could quickly become unbearable. Especially since on a global level, the price of electricity continues to climb. As William Clemente, co-founder of research firm Reflexitvy Research, explained:
I wonder who this entity/entity is that thinks he/she is benefitting me with the price of BTC down 70%, energy prices being high and a hash price that has never been. low. I wonder if there are one or more big players who have excess energy or access to very cheap energy.
If the identity of the entities is still a mystery, these would come from Russia. As Steve Barbour said:
Russia is where the hashrate goes. Manufacturers admitted that they recently sold more ASICs to Russia than to the United States and guess what happens when you blow pipelines and power bottlenecks? Bitcoin solves the problem.
According to MiningPoolStats, the hash rate today would be 270 exahashes per second. This new increase is at the root of the increased difficulty of mining. Today, the difficulty has increased by another 3.44%. Taking it to an all-time high of close to 37 trillion. The old adage that the price follows the hash rate seems to be well worn today.
The Twitter account of the Game of Crafts summarizes the situation: “the capitulations are here”. In particular, it was revealed that the total supply of BTC is now in losses at the second highest level ever, taking into account a 30-day moving average.
According to Glassnode, this equates to approx $8 million and the second highest level ever after 2019. As shown in the chart below.
Lost sellers are therefore increasing. Some followers, however, qualified the statement by pointing out that the figures were lower when only the supply in circulation was considered. At the same time, Glassnode notes that the share of Bitcoin has been idle for more than 5 years at the maximum level: over 25%.