Shift to Risk-on: Bitcoin Is Up 12% Already in Uptober Amidst Stock Market Weakness

Starting the month around $44,000, Bitcoin price went as high as $49,300 late on Sunday. As of writing, BTC/USD is trading around $47,650 with $26 billion in trading volume.

Last week Friday’s uptrend in Bitcoin’s price was the biggest daily gain since July, which was also seen in other crypto assets as well. After rising as high as $3,490, Ether is currently around $3,330.

ETH and #BTC one-month correlation = 93%: September was dominated by macro developments. pic.twitter.com/UEYm0uxIn6

— Coinbase Institutional (@CoinbaseInsto) October 4, 2021

In the past week, the biggest gainers include AXS, leading the gains with 137%, then OMG 100%, OHM 52%, QTUM 48%, XTZ 38%, OKB 38%, dYdX 37%, and LUNA 35%. Some other decent gainers in the past 24 hours include ALGO 14%, SHIB 9%, ENJ 8.5%, and HOT 7%.

The total market cap is now back around $2.2 trillion.

The fact that Bitcoin is holding on to the 12% spike in the price of the leading cryptocurrency may have significantly changed its technical setup, said Tom Lee’s Fundstrat. According to strategists at Fundstrat, the breakout “looks important technically.”

“Prices have eclipsed weekly highs as well as one-month downtrends,” they said. While trends turned negative last month, “Friday’s move is a big positive in helping to resolve this consolidation.”

So, it makes sense that Fundstrat is bullish and looking upward for its next key levels. “The first upside target lies at September highs at $52,956, then $64,895,” the strategists said.

The Micro and Macro Effect

This latest increase in Bitcoin’s price may be fueled by a short squeeze in part of the market, as per JST Capital co-founder Todd Morakis and Jonathan Cheesman, head of OTC and institutional sales at crypto derivatives exchange FTX.

According to Joseph Edwards, Enigma Securities’ head of research, the spike in volume on crypto derivatives exchange was a possible driver for the moves. In the futures market, Bitcoin had a net short position of -883, the smallest since mid-August.

After the brutal September — which has been historically expected and the value of Bitcoin dropped 7.2% — amid concern about increasing regulatory pressure in China and the U.S, October is looking more and more like Uptober.

According to viewbase, under the influence of Chinese supervision, the inflow and outflow of Bitcoin has changed significantly in the past month: Binance (+7,043 BTC), Bitfinex (+4,870 BTC), Coinbase (+122 BTC); Huobi (-13,903 BTC), Ou Yi (-5,872 BTC), Gateio (-95 BTC). pic.twitter.com/e7vufmHl2j

— Wu Blockchain (@WuBlockchain) October 4, 2021

Technically, “the rally has also preserved positive intermediate-term momentum” through the moving average convergence/divergence indicator, said Fairlead Strategies LLC’s Katie Stockton in a note. But at the same time, she sees a counter-trend signal coming from another technical framework, DeMark indicators, that could prevent follow-through on the move.

“We would feel more comfortable moving to a bullish short-term bias once this signal is invalidated — which in our work would require two closes above $48,800,” she said.

After trading sideways for weeks, the market was particularly excited last week, with Federal Reserve Jerome Powell saying they have no intention to ban cryptocurrencies.

This “combined with weakness in the stock market, and the month of October being a typically bullish time for crypto markets, could signal a shift to risk-on trading in crypto markets for the next several weeks, as investors seek returns in non-traditional assets,” said Leah Wald, chief executive of crypto asset manager Valkyrie Investments.

However, the dollar has been showing strength, hitting a new 2021 high at 94.5 on Sept 30 and currently at 93.84. USD is headed for its best week since June, which could spell some trouble for crypto prices.

Overall, seasonality and positive market fundamentals see the crypto market primed for substantial gains in Q4, which has often seen strong performances.