October Crypto Rally Is Probably Imminent, Here’s Why

This past week, the flagship cryptocurrency printed a rise of roughly 4.4% as it surged from slightly under $63,000 to touch the $66,000 price level.

Overall, the BTC price has soared a remarkable 4.11% in seven days.

By now, BTC has grown even higher, surpassing the $65,500 level with a big green candle on an hourly chart.

Bitcoin is set for one of the biggest Uptobers in its history and, judging by BTC’s current dominance, the crypto market in general will follow its steps.

Will this actually happen?

The Fed rate cut

The Federal Reserve’s recent 50 basis point rate cut, the first in over four years, was seen as positive for risky assets like Bitcoin. However, Chair Jerome Powell emphasized that future rate decisions would depend on economic data, tempering the initial market reaction.

Lower interest rates typically boost demand for riskier assets, and after some delay, the market began reflecting optimism. Bitcoin briefly rose 2%, reaching $60,000, before stabilizing.

Last week, U.S. stocks hit record highs and Bitcoin surged past $64,000.

Hedge fund manager Anthony Scaramucci predicted Bitcoin could hit new record highs, fueled by the rate cut and clearer U.S. crypto regulations. This combination could drive further growth in the digital asset market.

Bitcoin/S&P 500 correlation

Digital assets and U.S. stocks are increasingly moving in tandem, with a 40-day correlation between the top 100 digital assets and the S&P 500 Index reaching 0.67.

This highlights the significant impact macroeconomic factors are having on both markets. The only time this correlation was higher was in Q2, 2022, at 0.72.

As Bitcoin increasingly acts like a risk-on asset, its correlation with the S&P 500 strengthens, while its safe-haven relationship with Gold declines. Institutional investors are focused on U.S. economic data for signals on future rate cuts, which are expected to continue influencing crypto prices during the Federal Reserve’s easing cycle.

The S&P 500, a key indicator of the broader U.S. market, was valued at $45.84 trillion in June 2024. It reached a new all-time high of 5670 just before the FOMC meeting, with market speculation pointing to a 0.5% rate cut.

Bitcoin and the S&P 500 have shown strong correlation in recent years, particularly during the 2021 bull market. In early 2024, both assets hit new yearly highs, and their correlation is rising once again.

Despite some short-term bearish signals for Bitcoin and the S&P 500, historical data suggests positive returns over longer periods when markets have avoided recessions, as seen in 1990, 2001 and 2007.

Uptober imminent?

October is considered to be the strongest month for Bitcoin. If we look at the charts for the last five years, we will see, in fact, that the BTC price is always bullish in October.

Bitcoin is up nearly 11% this month, compared to an average 5.9% loss in September over the last decade. In terms of monthly returns, September has been one of the greenest months in BTC history.

According to CryptoQuant, Bitcoin’s Market Value to Realized Value (MVRV) has signaled a bullish trend.

The MVRV ratio is calculated by dividing Bitcoin’s current market value by its realized value, or the price at which all coins in circulation were last transacted on-chain.

Currently, Bitcoin’s MVRV stands at 2.04, slightly above its 365-day simple moving average (SMA) of 2.02, which indicates a potential positive momentum in the market. This crossing of the MVRV over the SMA 365 is often seen as a bullish signal by traders.

Analyst Will Woo recently shared an optimistic view on Bitcoin, suggesting the market is transitioning from its short-term bearish phase.

Meanwhile, veteran trader Peter Brandt highlighted Bitcoin’s ongoing price action, noting that it remains locked in a pattern of lower highs and lower lows.

Bitcoin ($BTCUSD) continues to be in a sequence of lower highs and lower lows. Only a meaningful close above the Jul highs would change this sequence and official complete the 6-month expanding triangle pic.twitter.com/GaSBWZRoE6

— Peter Brandt (@PeterLBrandt) September 25, 2024

Brandt emphasized that only a close above the July highs would break this trend and complete the six-month expanding triangle that has formed. Until this level is reached, Brandt believes the bearish pattern remains intact.

Source