Bitcoin’s (BTC) typical strong performance in October faces potential challenges due to elevated open interest in futures contracts and decreasing buying activity among spot investors, as outlined in the Sept. 30 edition of the Bitfinex Alpha report.
The report underscores that October has historically been favorable for Bitcoin, boasting an average return of 22.9% and a median return of 27.7% since 2013. This trend has earned the name “Uptober,” typically leading to sustained upward movement through the fourth quarter, during which the market has averaged a return of 88.8%.
Bullish Indicators for ‘Uptober’
The report indicates that anticipated Federal Reserve rate cuts also contribute to positive sentiment as Bitcoin transitions into the final quarter of the year. Fed Chair Jerome Powell recently hinted at the possibility of a 50 basis point cut this year during his address at the National Association for Business Economics on Sept. 30.
In addition, Bitcoin has demonstrated a remarkable recovery, surging by 26.2% since its correction on Sept. 6, climbing above the $65,000 mark, and breaking past the August 25 local high of $65,200. This marks a significant movement above a local top for the first time since March.
Moreover, Bitcoin’s current trading range between $50,000 and $68,000 reflects its pre-halving pattern from 2020, where an October rally resulted in considerable price increases.
Potential Red Flags
Despite these optimistic signals for a robust fourth quarter, the report also identifies several potential risks that could impact Bitcoin’s performance.
- Decreased Spot Market Activity: There has been a noticeable reduction in aggressive buying in the spot market. Following the significant accumulation of BTC by spot investors since September 6, interest seems to be waning, indicating a temporary equilibrium between buyers and sellers.
- High Futures Open Interest: Bitcoin futures have recorded an open interest of $35.3 billion, a level often seen during local market peaks, raising concerns about possible market “overheating.”
However, analysts at Bitfinex suggest that a corrective pullback of 5% to 10% could stabilize the market without halting Bitcoin’s upward momentum.
