Arcane Research: BTC shows bullish performance in October

Arcane Research senior analyst Vetle Lunde has said that Bitcoin (BTC) showed a bullish performance in October.

Lunde explained that there was an increase in transaction volume and a decline in volatility in the BTC spot market. In the past week, BTC spot volume went up 46 percent while the 30-day volatility index was at a two-year low.

The analyst explained that BTC benefitted from a short squeeze in the crypto market. Last week, the crypto market recorded its largest short liquidation volume since July 26, 2021. Although the brief squeeze offered an overall haul to the market, Lunde said it did not affect the BTC price substantially.

Lunde compared the volatility of July 26’s short squeeze with the one in October, saying that the market moved up hastily in the earlier squeeze.

“The July 26 squeeze saw a daily high-low variation of 15% as markets hastily moved up, whereas the October 25 and October 26 moves saw daily high-low variations of 5% and 6%, respectively,” Lunde said. “Further, momentum has stopped, indicating that traders should brace for longer consolidation.”

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The increased activity in BTC enabled the token to grow by six percent. Meanwhile, Ether and BNB recorded higher gains at 18 percent and 19 percent, respectively.

Lunde maintained that BTC and digital assets adoption would continue to be a trend in the longer term. At the moment, BTC’s on-chain transactions have reduced significantly. Lunde, however, pointed out that a clear regulation would encourage people to participate in the BTC market.

Some challenges that BTC is currently facing are its correlation to the equity market, muted growth and pricing downtrend for almost a year. Analysts, however, have said that BTC is undervalued. BTC’s high correlation with the equity market also highlights the importance of monitoring Q3 earnings reports.

Despite BTC’s bear market, analysts insisted that long-term investors were still experiencing profit. The total supply in profit for long-term holders was at 60 percent. Analysts said that long-term holders had less pressure to sell their assets.

MicroStrategy CEO Phong Le explained that his company’s long-term BTC holding strategy still allowed it to narrow its Q3 net loss. At the end of the third quarter, MicroStrategy still reserved 130,000 BTC units. Le added that the company did not plan to sell its BTC assets because the tokens did not hurt its core business.

Fed policy, BTC price

The Federal Reserve’s monetary policy continues to influence the crypto market. Following the latest Federal Open Market Committee (FOMC) meeting, Fed chief Jerome Powell will address the public to discuss the country’s monetary policy, inflation progress and future rate hikes.

Lunde said that the market should prepare for two scenarios, further rate hikes and subtle pivot signals, with the first being the “most plausible.” According to Lunde, it will maintain the BTC market’s correlation with other markets at a high level. It will also dampen market activities.

On the other hand, if Powell signals policy pivots, the correlated market condition will decline. This situation will help the crypto market “decouple” from the equity market. It is also possible that BTC’s price will advance significantly following hints of policy pivots.

Data showed that BTC might be able to establish a $20,000 support point, as the price hovered above $20,000 throughout last week. Analysts said that it would take months for BTC to reach its next breakout.