[TL; DR]
There has been a rise in bitcoin outflows from exchanges following its price fall below $60,000.
The geopolitical tension in the Middle East has resulted in a depressed crypto market.
As the market anticipates an Uptober rally, investors should buy and hold bitcoin.
Introduction
Since the start of October bitcoin price trajectory has remained uncertain despite the hype of the Uptober bull run. The effect of the recent Federal rates cut has not been felt on the crypto sector as well. On the other hand, the Middle East political tension has depressed the crypto market and added much uncertainty to the sector. As a result of the uncertainty some analysts forecast the bitcoin price to rise past $65,000 while others believe that it will fall towards $53,000. This article focuses on the impact of bitcoin’s recent fall below the $60k support level.
Tracking Bitcoin Market Price Trajectory: The Significance of Bitcoin Fall below $60,000
On 3 October the bitcoin price fell below the $60k support level after spending several months fluctuating between $54,000 and $66,000. Since that bitcoin price dip there has been a rise in bitcoin sales and purchases alike. Basically, large scale investors have been acquiring the coin in large amounts while the short-term holders have been selling it. Recently, bitcoin experienced local lows of around $59,000. The bitcoin whales capitalized on bitcoin’s price fall to buy the dip, anticipating its value to rise in the near-term.
Data from CryptoQuant shows a rise in exchange buying of bitcoin following the price dip. According to CryptoOnchain, a CryptoQuant analyst, the BTC outflows from exchanges have surpassed the 2022 level. The 20-day, 30-day and 50-day moving averages indicate that the outflows may continue . The following chart gives a view of what has been happening on the exchanges in this regard. Bitcoin Exchange Outflows- CryptoQuant
The BTC outflows are confirmed by a decrease in exchange reserves. For example, by 29 September the bitcoin exchange reserves had fallen to 2.7 million BTC. The drop in bitcoin reserves also means that there has been a decrease in selling pressure. Generally, a rise in exchange outflows is a bullish signal as that shows that the investors are willing to hold the asset rather than selling it. Based on the BTC price analysis, the increased crypto exchanges outflow results in bitcoin scarcity on the market which helps to drive its price up. Also, according to on-chain data there has been a rise in bids due to bitcoin’s current price. In all, these trends show a bullish market sentiment.
Bitcoin Price Performance Amidst Middle East Political Tension
Based on the recent market update, one of the factors that has contributed to the bitcoin drawdown is the Middle East political crisis. Iran’s 1 October attack on Israel resulted in a rise in bitcoin selling pressure. For example, during the week in which Iran attacked Israel the price of bitcoin decreased by 8%. Basically, the political crisis has resulted in a surge in prices of oil, which in turn reinforced the value of the dollar.
Although bitcoin has been regarded as an asset that hedges against some risks. Crypto market trends show that it hedges against systematic financial risks such as the collapse of banks. Nevertheless, bitcoin is not a safe haven for geopolitical concerns. For that reason, the bitcoin volatility increased due to the Middle East political crisis. Notably, the crypto market slumber has affected many other crypto assets. As an instance, the ETH price fell by 12.60% within the same period. If the political tension escalates the price of bitcoin may fall further.
The up-coming United States presidential elections can trigger bearish pressure or bullish momentum, depending on its outcome. Since many crypto enthusiasts view Donald Trump as a pro-crypto leader, his election victory may trigger a crypto bull run. On the other hand, Kamala Harris’ win may lead to a bearish outlook. However, that will depend on the economic and regulatory path she will take.
The Future of Cryptocurrencies as the Market Reacts to Positive and Negative Factors Impacting on Digital asset Price Movements
As said above, the political tension in the Middle East is one of the negative factors affecting the prices of crypto assets. Various perspectives have been shared on how the digital currencies will react to current events such as the on-coming United States presidential elections and its monetary policy changes. For example, Toni Ghinea believes that the bitcoin price may fall to around $56,000 as a result of the existing macroeconomic outlook and the Middle East political crises. Posting on X, he said “Anyone bullish into October is on the WRONG SIDE.” Bearish Forecast for Bitcoin: x.com/Tonighinea
Ghinea’s view shows that bearish sentiment toward bitcoin is increasing as we move deeper into October. Sadly, the Uptober rally sentiment that existed during September has failed to ignite a crypto bull run.
Despite what seems to be the dominant bearish market sentiment, other investors have maintained a bullish outlook on bitcoin and most altcoins. CrypNuevo is one such optimist. He thinks that bitcoin’s $60,000 price level should act as a strong recovery zone. He said, “We reached exactly $60,000 psychological level. It would make sense to drop slightly below it to hit stop-losses and some high lev. liquidations before a reversal. Also, if we see $59k even if it’s for a few hours, retail will start to panic.”
He continued: “It would make sense to drop slightly below it to hit stop-losses and some high lev. liquidations before a reversal. Also, if we see $59k even if it's for a few hours, retail will start to panic.”
Macroeconomic Determinants of Bitcoin Performance: Focus on U.S Economic Indicators
Changes in the United States monetary policy has a strong bearing on the performance of bitcoin and other crypto assets. The Federal Reserve position regarding interest rates is very important. A reduction in interest rates will likely boost the demand of bitcoin. This is because a fall in interest rates increases macro liquidity which favors investment in riskier assets such as bitcoin. With lower interest rates investors can get cheaper capital which drives the value of bitcoin up. For example, after the previous U.S interest rates cut by 50 basis points prices of most cryptocurrencies surged. However, the crypto bullishness did not last long. Other factors such as the geopolitical tension in the Middle East could have weighed down the crypto market.
Historically, though, interest rates cut in the United States resulted in sustained rallies for leading cryptocurrencies, including bitcoin. However, in some cases the interest rate cuts do not have much positive influence on the price of bitcoin. For example, the Fed rates cut of 2001 and 2007 were followed by recessions which led to the cryptocurrency market downturns.
The fall of inflation in leading economies such as the United States can also lead to a crypto market recovery. In fact, the level of inflation in the U.S is one of the key macroeconomic factors that determine the prices of digital currencies. For example, countries that have persistent high inflation have high adoption rates of cryptocurrencies, particularly bitcoin. Examples of such countries are Brazil and Nigeria. This is because the residents use bitcoin to hedge against inflation.
The Near-Term Crypto Market Outlook: Can Uptober Really Prevail?
There are several factors that can bolster the performance of cryptocurrencies in October. For example, based on the recent United States labor statistics unemployment is low which favors a robust crypto market. Some analysts believe that bitcoin’s recent price fall below $60,000 and the ETH price drop below $2,400 will only generate short-term bearishness. Posting on its blog QCP Group said, “Despite Middle Eastern tensions impacting Bitcoin during its historically strong month, we see this dip as temporary and expect the “Uptober” rally to prevail.”
It then added, “We believe this weakness is temporary, given the strong correlation between crypto and U.S. stocks. As U.S. equities recover, crypto is likely to follow. This correlation highlights that macroeconomic factors are currently the main drivers of risk asset prices.”
Another analyst, Axel Adler, also believes that the Uptober rally will be a reality. He said, “Average Bitcoin drop was 10%, except for August, when the price plunged by 22%. The current drop is 7%. Just because Uptober started this way doesn’t mean it will end the same.” However, he has called on short-term speculators to reduce bitcoin supply by at least 800,000 BTC.
Santiment has also noted that there has been a significant cool-off in crowd sentiment which is vital for a crypto market recovery. It explained the link between the two: “With Bitcoin retracing -9.2% since its $66.4K local high on September 27th, the crowd has cooled its excitement toward crypto considerably. This change in mood is encouraging, considering markets typically always move in the opposite direction of the crowd's expectation.” There is much positive market sentiment to ignite and sustain an Uptober rally.
Strategies for Traders from Gate.io Analytics
Looking at the recent huge bitcoin exchange withdrawals investors should use appropriate strategies. First, it is time to adopt the long-term holding strategy in order to ride the upcoming uptrend. October and November are the best months for bitcoin. By being proactive the investors can reap higher returns than otherwise. In a related note, it is time to increase position sizes as the outflows show a high possibility of a rally. At the same time, investors should use trailing stop losses to lock in whatever profits they generate as the bitcoin price rises.
Although the investors may choose to invest much in bitcoin it is also wise to increase investment in other cryptocurrencies. It is time to invest in other promising coins and tokens such as SUI, TAO and Fet. Since the list is long every crypto investor should carry a personal research to identify the assets that best suit his/her crypto trading strategies.
Finally, it is important for every investor to use technical analysis to predict the price directions of the assets he/she wants to invest in. Popular chart patterns like pin bars, head and shoulder as well as reversal candlesticks are essential to guide investors on the strategies the crypto strategies to adopt. Indicator analysis can also help an investor to monitor changes in the crypto market. The Relative Strength Index (RSI), Bollinger Bands and MACD are some of the leading technical indicators to use.
Conclusion
Bitcoin experienced record exchange withdrawals following its price drop below the $60K support. The recent Fed Rates cuts and slowing inflation have helped the bitcoin price to stabilize within a narrow range. On the other hand, the Middle East geopolitical tension has slowed down the performance of the crypto market. One of the best crypto trading strategies to adopt is long-term holding of major cryptocurrencies such as bitcoin. In all, the market still harbors the hope that there will be a crypto market wide Uptober rally.