With BTC Approaching $70,000, Is a New Bull Market Coming?
[TL；DR]:
After a brief market correction in early October, Bitcoin again demonstrated its historical pattern of the “October effect” and has now broken through the downward trend line, approaching $70,000.
From early October to the present, despite a few days of net outflows, the number of days and amount of net inflows have dominated, especially on October 14, 16, and 17, when the net inflows exceeded hundreds of millions of dollars, demonstrating strong buying power.
This round of the Altcoin market showed different characteristics from before, with the Meme sector dominating and VC coins showing weak performance.
Introduction
Under the self-verification of the “October effect” in the market, Bitcoin has steadily risen this month and is currently approaching the integer level of $70,000. Does this mean that the market has ended its more than six-month period of consolidation, and is the second phase of the bull market about to arrive? The following text will provide you with a preliminary analysis.
Bitcoin Breaks Through Downward Pressure, $70,000 Integer Threshold will Determine Direction
After a brief market correction in early October, Bitcoin again demonstrated its self-predictive power of the “October Effect.” Specifically, Bitcoin started from a low of $52,000 in early September and has steadily risen for over a month, reaching a peak of $69,000. It has returned to a downward channel and is expected to rise again. The $70,000 mark is expected to be a key position for market information conversion, and it is only about $4,000 away from its historical high.
As of October 15, Bitcoin successfully broke through the $67,000 mark and continued to rise in the following three days, with a cumulative increase of about 10%. The price breakthrough this time is of great significance to technical analysts, as it has finally emerged from the suppression of the six-month downward trend line, which is often seen as an important signal of a resurgence of upward momentum in previous trends.
Source: Gate.io
From the perspective of market sentiment, the Fear & Greed Index has also risen to 70, and the market has been in a greedy state for the past 7 days, which undoubtedly reflects that investors’ optimism towards the market is constantly heating up.
Source: coinglass
However, it is worth noting that this emotional rebound seems limited to Bitcoin itself, and the follow-up effect of other altcoins is not significant. According to the data on Bitcoin’s (BTC.D) market capitalization, BTC.D currently reached a high of 57.2%, setting a new high for this cycle and also the highest point since April 2021. This further proves Bitcoin’s dominant position in the crypto market and investors’ strong optimism towards it.
Source: CoinMarketcap
In addition, from the perspective of peripheral markets, the three major US stock indices have risen for the sixth consecutive week, with the S&P and Dow Jones Industrial Average setting a record for the longest consecutive week of gains this year. Gold prices also hit a new historical high, silver rose to a nearly twelve-year high, while the US dollar index remained above the 103 level. As the US presidential election enters a critical stage, market optimism emerges after multi-party games, and the pattern of hot and cold market rotation has always been like this.
Spot ETFs Remain the Driving Force Behind the Rise
We already sorted out the driving factors of the current market from a macro perspective in last week’s blog post, “The Market is Generally Rising, with Optimistic Sentiment, Analyze the New Round of Upward Cycle”. Based on the current market situation, spot ETFs can be seen as the Grayscale Bitcoin trust of the last bull market and are still an important driving force supporting the value of Bitcoin.
Firstly, the data from the Bitcoin spot ETF shows a significant inflow, representing an increase in the amount of funds purchased off the exchange. From early October to the present, despite a few days of net outflows, the number of days and amount of net inflows have dominated, especially on October 14, 16, and 17, when the net inflows exceeded hundreds of millions of dollars, demonstrating strong buying power.
Source: SoSoValue
Meanwhile, Ethereum spot ETFs also experienced a rare daily net inflow, further demonstrating the strong purchasing power of over-the-counter funds.
Secondly, the growth of the stablecoin market cap also reflects the inflow of funds. According to the latest data, the total market cap of stablecoins approached a historical high in October 2023, indicating a continuous acceleration of off-market capital inflows. From a historical perspective, this trend corresponds to the rise in Bitcoin prices, indicating that investors’ confidence in the crypto market is increasing.
Source: CoinGecko
Long-term holders also indicate a rebound in market sentiment. Currently, long-term holders are also continuously increasing their holdings of BTC, with 95% of BTC addresses achieving profitability, which usually indicates strong bullish momentum. According to historical patterns, the RHODL indicator will experience a sideways adjustment of about half a year before and after halving. Now, based on historical experience, the adjustment is approaching its end.
As shown in the figure below, RHODL (Realized HODL Ratio) represents the ratio of the number of BTC moved on the chain within one week to the number of BTC not moved on the chain within 1-2 years (weighted by Realized Cap).
Source: @0xCryptoChan
Although the Altcoin Season is Late, Has it Arrived?
But the market situation seems different this round. From the perspective of historical patterns, before a bull market erupts, it is often accompanied by a large number of purchases of Bitcoin by major funds, which in turn drives up its price and, to some extent, “feeds” on Altcoins. However, when the price of Bitcoin rises to a certain extent, funds usually flow out and pull other Altcoins, thus starting the Altcoin season.
Source: blockchaincenter.net
But the market situation seems different this round.
The Altcoin market has become more widespread and fragmented than the previous bull market and has experienced intense volatility, putting pressure on investors. In fact, since November 2022, the performance of Altcoins has been poor, and the market breadth is worrying. Currently, the market is highly concentrated and dominated by a few large-cap currencies, making it extremely difficult to select outstanding Altcoins.
The launch of the US spot Bitcoin ETFs is considered one of the most critical events, as it breaks the traditional trend of the Altcoin season. Unlike the previous path of capital injection into Bitcoin and overflow into Altcoins, these off-exchange funds are only fond of buying and holding Bitcoin, leading to a sharp decline in Altcoins after a brief rebound.
Of course, from a macroeconomic perspective, factors such as rising unemployment rates, high interest rates, and yen arbitrage trading have significantly increased market uncertainty. In this risk-averse environment, altcoins’ performance is naturally weak.
From a technical perspective, public chains such as Solana and Base have brought new hope to the blockchain industry, driving the explosion of MEME tokens on the chain. However, this does not mean that the Altcoin season has arrived or is about to arrive. On the contrary, whether it is PvP’s on-chain Meme or VC coins that are ignored, both indicate that the current market is still in a state of stock game, with more and more newly launched projects diluting market liquidity, resulting in a deteriorating profitability effect and a faster pace of market rotation.
Source: @pakpakchicken
In the current cycle of slow interest rate cuts by the Federal Reserve and the expectation of insufficient liquidity in the market, many people have postponed the start of the Altcoin season. For example, Arthur Hayes believes the Altcoin season will only return after Bitcoin and Ethereum break through certain prices.
Overall, the bull market showed different characteristics from the past, with BTC dominance continuing to rise and the Altcoin season appearing late. Investors should adopt a cautious investment philosophy to cope with complex market changes.
