Bitget's Insights: October Crypto Market Predictions
Hello everyone and welcome to this new article where we will try to anticipate the crypto market movements of October 2022.
The first thing to note is that the difficulties faced by the crypto market also concern the traditional market. The crypto market has amazed us all in its ability to withstand the pressure of the equity market as well as the new annual high in the price of the US dollar. Now that the dollar is starting to consolidate, interest rates are starting to fall and the stock market is rebounding, will cryptos benefit from these factors or not? It would have been useless to resist in September if it is not to then perform and take advantage of cross-asset rebounds.
We will see and we remain extremely cautious. Don't forget that we are in a context where at any moment, news can upset the price action.
Have we reached the major low point?
To project about cryptos we must first study the US dollar. Have we found a long-term high point for the US dollar? This is an indicator that many technical analysts are watching and we wanted to emphasize this. When we look at the flows in the US on precious metals ETFs, e.g. gold and silver metal as well as crypto ETFs, if there has been an outflow in the last few months, we notice that when you ask the US high finance, then the reason given is only the rising dollar. The high point of the dollar could be the low point of the crypto market unless there is a black swan or exceptional event. In September, the buying behavior of the US dollar reached an all-time high and made it "the most crowded trade" of the month.
Another avenue of analysis to find the answer to the question of whether the crypto market has made its low point or not is to monitor the day when the monetary pivot of the central banks will be acted upon, that is to say, a conviction that the rise in interest rates is over and where we can project a future decline. To analyze this, we recommend using an interest rate spread, specifically the difference between the 10-year and 2-year interest rates in the US. Currently, short-term interest rates are higher than long-term interest rates and we call this the inversion of the yield curve. Indeed, the capitalist logic is that long-term rates are higher than short-term rates. The day when the end of the inversion of the yield curve is confirmed with a high probability, then the crypto market has a great chance to have made or to make its low point.
When there is a return of crypto VS stocks crypto VS precious metals arbitrage in favor of the crypto market, then likewise, the crypto market has a strong potential to have already made or soon to make its low point. For this, we recommend that you practice technical analysis on the BTC/SP500 and BTC/Gold ratios. All the long-term bullish signals on the BTC/SP500 ratio have been low point signals in the crypto market. It hasn't happened yet. The reverse is true. All bearish signals on the BTC/SP500 ratio have been crypto market high point signals.
When there is a return in both price reaction and volume of institutional flows into the crypto market, then the crypto market will have potentially already made or will make its low point. There are several ways to analyze volume. The one we recommend is to look at the Chicago Mercantile Exchange (CME), with its COT (Commitment of Traders) Report, which is published every Friday and is based on Tuesday's figures giving the Open Interest on Bitcoin futures and options contracts. You can also get hints from technical analysis of large institutional crypto funds like ProShares or Greyscale.
The US dollar is pulling back in the short term which is a good thing for the crypto market. Regarding the Bitcoin price, nothing to report since the beginning of September. After resisting in September, if in October Bitcoin is not able to take advantage of the rebound in stocks, then it would not be good. We see two main alternatives: towards US$14,000 or US$25,000.
On Ethereum, the same thing, nothing has changed. We have stabilized on the US$1,240 price zone which was the July 2022 acceleration level. We also see two main scenarios: break down and go back to US$1,000 or break up to US$1,500.
When we see the SP500 rebound strongly or the U.S. dollar pulls back, then we think it's time for the crypto market to take its chance. If it doesn't, then the market will certainly go lower.
From a relative standpoint, we currently have perhaps the beginning of a crypto-friendly arbitrage against stocks and precious metals.
If you want to answer the question: “when will the crypto market bottom out?”; If you have set your ego aside, then the answer will not be: when Bitcoin is $18,000, $15,000, $12,000, or $10,000. We propose to give you global and contextual factors that can create the low point of the market. The market also has its own fundamentals, of course, but is still under the influence of exogenous fundamentals. In real life, the impossible can become possible, so we should always be conservative.
Disclaimer: This article is for educational purposes only and is not intended as investment advice. Qualified professionals should be consulted prior to making financial decisions.
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