Introduction to Bitcoin’s Key Week
Bitcoin starts a key week of October with the fate of the bull market at stake. What comes next? The largest-ever liquidation cascade was followed by a solid rebound, reaching a high of $116,000 so far. Traders are divided over where the market will head from here, with some doubting that the bull market will ever return. A giant reset in leverage offers potential relief for bulls, but shorts remain a concern.
Bitcoin’s Rebound and Market Volatility
Bitcoin managed to return to $116,000 to start the week as weekly close volatility came in right on cue. That represented a 5.7% rebound versus Friday’s lows of $109,700 that followed the largest liquidity wipe-out in crypto market history. The crypto market added more than half a billion dollars to its market cap after Friday’s lows. Given that some short traders had timed the market a little too well, co-founder Adam Kobeissi described the comeback as “game over.”
Impact of US-China Trade War
A single tariff announcement as part of the US-China trade war was all it took to create unprecedented panic. Even stocks and gold joined the mayhem, but by Monday, the latter had seen new all-time highs of $4,078 per ounce. US President Donald Trump, whose message on Truth Social started the rout, aided the recovery in the same way. “Don’t worry about China, it will all be fine!” he wrote on Sunday.
Bitcoin Bull Market Hinges on Key Trendline
Traders face a dilemma this week: Is the worst over, or just the start of a major BTC price correction? For trader Roman, who has long been suspicious of the bull market’s strength, the choice is clearly the latter. “Last week’s flash crash perfectly bounced off our diagonal uptrend support from August 2024 at 40k,” he wrote alongside a chart on X. More hopeful market takes came from trader Skew, who observed that “large players” were entering as the BTC price retook $115,000.
Analysts’ Insights
Analyst Frank A. Fetter noted that implied volatility is now at its highest levels since April, which was the height of the tariffs debacle. “BTC implied volatility just spiked: the market is now pricing in larger potential moves ahead. Finally,” he told X followers. Rafael Schultze-Kraft, co-founder of Glassnode, said that liquidations were “almost certainly larger” thanks to incomplete reporting by market sources. “Our BTC Long/Short Bias chart, tracking the aggregate net positions of the largest BTC traders on Hyperliquid, showed a steep rise in net shorts starting in Oct 6th, well before Friday’s events,” he added.
Missing Data Puts Focus on Fed’s Powell
Two key US inflation gauges may have to wait this week thanks to the ongoing government shutdown. The September print of the Consumer Price Index (CPI) and Producer Price Index (PPI), along with initial jobless claims, was originally due for release this Thursday. Markets will be eyeing Powell’s language for confirmation of future interest-rate cuts, something risk-asset traders want to see as a liquidity tailwind.
Expectations for Interest-Rate Cuts
Expectations remain almost unanimous that the Fed will cut rates by 0.25% at its Oct. 29 meeting, per data from CME Group’s FedWatch Tool. Commenting, trading resource Mosaic Asset Company noted “deep divisions” among officials regarding the timing and extent of future cuts. “The minutes of the most recent rate-setting meeting shows that the Federal Reserve is staying on the easing path for now,” it wrote in the latest edition of its regular newsletter, The Market Mosaic.
All Aboard the "Debasement Trade" Train
Amid the short-term chaos, crypto and risk assets may be at the beginning of a much larger uptrend, thanks to shifting attitudes toward the US dollar and fiat currencies. Bitcoin’s latest bull market has accompanied the rise of the so-called “debasement trade,” a giant hedge against currency devaluation worldwide. With gold at new all-time highs as of Monday, Mosaic turned to what could become a fresh challenge to risk-asset bulls in the coming months: inflation.
Inflation Concerns
Mosaic referenced the “prices paid” component in the Fed’s recent business surveys, which it said is often a leading indicator for inflation trends. “While the increase in prices paid indicators aligns with the start of the trade war, currency debasement could be an underlying driver of inflation as well,” it added. Markets’ overall character this year may compound any future surprises in the macroeconomic story.
Conclusion
In conclusion, Bitcoin’s key week has begun with a rebound from its biggest-ever liquidation cascade, but the fate of the bull market remains at stake. Traders are divided, and analysts are warning of potential volatility and inflation concerns. As the market navigates this uncertain landscape, one thing is clear: the "debasement trade" is gaining momentum, and Bitcoin is leading the way. With the Fed’s Powell set to speak and inflation data delayed, the coming weeks will be crucial in determining the direction of the market.
