Bitcoin’s rise of an astonishing 9% over the previous three days offset the negative close of Q3 (-12%). Analysts at QCP Capital warned that the odds of retesting $25,000 should not be ruled out, despite the favorable seasonality.
QCP Capital is not optimistic about the sustainability of the recent rise and stated that BTC may test the critical support level of 25k in the last quarter of 2023, the approved futures Ethereum ETF may divert demand from the spot market, the lower-than-expected core PCE…
— Wu Blockchain (@WuBlockchain) October 2, 2023
According to the data, over the past eight years Bitcoin has finished October with losses only in 2018. In other years, gains ranged from 5.5% to 48.5%.
With November–December in view, the picture looks less rosy — in Q4 2018 the digital gold fell by almost half, but the year before it had risen by 142.2%.
Experts offered four arguments in favour of a forecast of a return to $25,000:
1. So far, this aggressive rebound has been driven almost entirely by external factors such as expectations for the upcoming approval of the first Ethereum futures ETF, the slowing Core PCE, and, at least for the next 45 days, the shutdown being averted. Experts questioned whether there was any additional ‘fuel’.
2. Expectations of negative momentum for Ethereum futures ETFs based on the behavior of similar Bitcoin-based instruments two years ago.
The reason — there is no direct spillover from demand for the new asset into the spot supply. In fact, the ETF is said to be “absorbing” purchases of physical cryptocurrency, the analysts noted.
3. While continued government funding is positive in the near term, it raises the risk of a shutdown after the 45-day period expires.
«We think a government shutdown would be the best mid-term solution for markets, since we have established an acceptable price floor in light of discussions on this topic» — the analysts said.
Historically since 1995 there have been five shutdowns during which the S&P 500 rose on average by 3.2%. During the last one (the longest shutdown in 30 years), stocks rose more than 10% as the situation was resolved.
4. Gold and real yields on US Treasuries are leading. If a deal between Republicans and Democrats again spurs a rise in the latter, risk assets would face far greater pain.
Should the Nasdaq 100 break through 14,500 or the S&P 500 through 4,250, Bitcoin would not fail to take notice.
«We are using this rally to buy hedges on the downside. We expect resistance at $29 000-30 000 to form a ceiling. The options market still offers a ‘cheap’ opportunity to participate in any sharp downturn» — the analysts said.
Against the backdrop of news that the shutdown was averted, traders liquidated short positions in crypto derivatives worth $94 million — the largest monthly total.
Macro analyst Noel Acheson отметила that the data above are reassuring, especially in light of Uptober expectations, but do not alter her views on the fragility of the latest upside move.
«Over the past several months we have seen a number of such sharp moves. Usually they are followed by a correction, sometimes sharp, sometimes gradual, but almost always returning to the level the market was at before the upside move» — she said.
As noted earlier, BitMEX co-founder Arthur Hayes allowed for a possible brief drop below $20,000 followed by a new bullish impulse. However, in September he pointed to positive prospects for digital gold despite the policy of the ФРС.