Bitcoin has seen a mild recovery ahead of the U.S. Federal Reserve’s crucial interest rate decision, trading at $80,900 after dipping to near $79,000 during the weekend. Contributing to a 2% rise during Wednesday’s Asian trading session, Bitcoin’s resurgence may not necessarily translate into sustained momentum, given the lull in spot demand which suggests Bitcoin could mark its second consecutive monthly decline in October.
Fed’s Rate Decision Under Spotlight
The market is intensely focused on the interest rate announcement expected today, coupled with a press briefing from Fed Chair Kevin Warsh. Investors are particularly attuned to any indications about a potential rate hike in December. An increase in borrowing costs could catalyze withdrawals from high-risk assets like cryptocurrencies.
“The focus is on today’s rate decision and the Fed Chair’s remarks. Rate hikes could accelerate outflows from risky assets,” said a market participant.
In tandem with Bitcoin’s bounce, altcoins also demonstrated recovery. Zcash (ZEC) surged by 8% to approximately $1,320, regaining ground lost in Monday’s sell-off. Other cryptocurrencies such as HYPE, XRP, and DOGE experienced gains of around 5% and 3% respectively. Ethereum and Solana both appreciated by 2%, reaching prices above $2,350 and $102. Binance Coin (BNB) saw a 1% rise, while TRX barely edged up.
Spot Demand Weakens as ETF Inflows Persist
Despite a year-to-date rally that saw Bitcoin hit $83,567 at the end of September, its subsequent retreat to $80,051 by October 25 corresponds to a 4.2% monthly decline, underperforming the historical average October gain of 18.1% since 2020. This underpins a potential second consecutive October slide, which would mark the weakest October since at least 2020.
Indicators of demand are also showing stress. Spot Bitcoin demand has been negative since October 14, with a cumulative reduction of approximately 76,000 BTC by October 25. The Coinbase Premium, a measure of U.S. investor buying power, remained negative throughout October, hitting a low of -0.146 on October 24, the lowest since June.
However, Bitcoin ETF inflows have continued. On October 27, net inflows totaled $24.5 million, mostly attributed to FBTC, while data for IBIT on the same day remains pending. On October 26, IBIT recorded a significant inflow of $110.3 million. The total ETF net inflow stands at $57.77 billion, with net assets and daily trading volume pegged at $107.36 billion and $2.15 billion respectively.
Uptrend Signals Sustain as Supports Monitor Future Movement
Short-term investor profit margins are narrowing, evidenced by the market premium over realized prices for holders of one to three-months decreasing from 33.4% on September 22 to 8.1% on October 26. According to CryptoQuant, this erosion signals that the market’s buffer against further price drops is significantly depleted.
“Even though the uptrend appears weakened, it’s not entirely broken. While the Bull Score Index fell from 90 to 60, six out of ten indicators maintain bullish signals. A drop below 50 in this index would indicate a change in market conditions,” noted CryptoQuant.
Galaxy Digital offers a more optimistic perspective. Alex Thorn, the firm’s head of research, opines that Bitcoin’s bear market likely ended in June when prices dipped below $58,000. He suggests that the market might be entering an accumulation phase akin to those preceding past rallies, based on price positioning above the 50-week moving average, reduced selling pressure, and rising U.S. debt levels.
CryptoQuant has identified the $73,000 to $77,600 range as a vital support zone, aligning with the 365-day moving average at $77,585, the realized price for short-term investors at $74,041, and the 200-day moving average at $73,028. Upcoming Fed rate decisions and the U.S. mid-term elections on November 3 are poised to significantly influence Bitcoin’s trajectory.
While Bitcoin’s recovery to $80,900 and continuing ETF inflows hint at resilience, the waning spot demand casts doubts on sustained momentum. The Bull Score Index maintaining a 60-point level suggests potential for further gains; however, the shrinking profit margin for short-term holders leaves the market more vulnerable to fresh sell-offs.
