FalconX finds signs of Uptober taking hold in the cryptocurrency market

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Liquidity dynamics suggest that Uptober could be the start of a new bullish trend in the digital-asset market. Analysts at FalxonX, as reported by CoinDesk.

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Experts say that the fuel for price growth will be increased interest from institutions and a decline in the number of sellers. Such conditions indicate that the market has entered a qualitatively new phase.

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Experts noted a revival of trading activity in Bitcoin and Ethereum. During the recent rally they logged two days in the top-15 by volume of trades in the last two years.

Overall, the metrics were higher than previously observed values, on which the FTX collapse in late 2022 and the US banking crisis in spring 2023 affected.

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Trading Activity

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Spot volumes of trading in digital gold, which had fallen to three-year lows in September, moved toward six-month highs, analysts said.

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Similar trends were observed in the derivatives market, especially on CME.

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Aggregate open interest (OI) in futures on two key cryptocurrencies surpassed $20 bn for the first time since the FTX collapse, in anticipation of the launch of the spot Bitcoin-ETF. The more active growth in the CME metric suggests institutional investor interest, the experts noted.

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In options, aggregate open interest exceeded $16 bn amid record trading volumes.

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Experts explained that much of the activity in the derivatives is reflected in the spot market due to traders hedging positions. Also increased activity in the derivatives market leads to higher leverage with risks of subsequent liquidations, they added.

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Liquidity Metrics

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The depth of the order book signals improved liquidity of key crypto assets.

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The chart below shows a 1% metric in US dollars and the assets’ own units for 2023. It demonstrates a decline in the metric over the last three to five months. The share of asks is decreasing faster than bids. In other words, there is a shortage of sellers relative to buyers, the analysts said.

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The buoyant derivatives activity is consistent with a tight spot market.

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The next chart shows realized volatility annualized, shifted back seven days to cover the latest price surge. Despite the recent rise in the metric (to 63%), in relative terms it remains below the average seen during the previous bull markets of 2020–2021.

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Outlook

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Rising volatility generally leads to higher trading activity. Current spot volumes, adjusted for this indicator, are already in the top quartile of the 2020/2021 bull cycle, analysts noted.

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\”Even if the probability of interim corrections increases and the macroeconomic environment remains ‘cloudy’, this rally could mark the start of the next upswing,\” the experts concluded.

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CoinGecko summarized the Uptober effect this year.

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CME’s Gio Viccioso said there was record interest in Bitcoin and Ethereum derivatives in Q3.

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In October, open interest on futures based on digital gold at the exchange surpassed 100 000 BTC.

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