It may not be below par, but the Arcane Research report outlines how the cryptocurrency market could perform in the short, medium, and long term.
In early November, analysts are busy studying the main market movements that occurred in October. While bitcoin
Arcane Research Senior Analyst Vetle Lunde remained relatively unchanged, with a rise of just 5.89% in October, setting the direction the market could move in the next few months.
Referring to Bitcoin’s historical bullish behavior in October, “Uptober” was a common theme in many Crypto Twitter threads, and according to Lunde, it looks like it has happened again. The data shows that BTC and exchange tokens outperformed the capitalization index until October 26th.
Elon Musk’s takeover of Twitter helped propel the capitalization index above bitcoin with a staggering 20% monthly gain. dogecoin
This has helped bolster its massive market capitalization, delivering a 144% gain over the past seven days.
Weighted index figures for October 2022. Source: Confidential research.
The Bitcoin spot market in October was driven by increased volume and low volatility while benefiting from a brief squeeze that briefly revived the market. According to Lunde, the last week of October saw the largest volume of short liquidations in cryptocurrency since July 26, 2021.
While this activity helped boost Bitcoin by 6%, Ethereum
there was a more significant increase of 18% and 19% respectively.
Average daily BTC USD volume over 7 days with and without Binance. Source: Confidential research.
The short squeeze helped drive the overall rally, but Lunde concluded that the momentum did not translate into significant changes in BTC price. BTC spot volume has increased by 46% over the past seven days, and the 30-day volatility index is at a two-year low. In addition, the seven-day volatility index is 2.2% with an annual average of 3%.
30 day and 7 day swing for BTC. Source: Confidential research.
Comparing the volatility of the previous short squeeze with the last short squeeze, Lunde said:
“Congestion on July 26 showed daily high and low swings of 15% as markets rushed higher, while moves on October 25 and 26 showed daily high and low swings of 5% and 6% respectively. Moreover, the cessation of momentum indicates that traders should brace for a longer consolidation.”
While bitcoin has an attractive price, Lunde said, the best approach to this market is to use short-term dollar cost averaging rather than leverage. Bitcoin has uniquely low volatility and closely follows the US stock market, so it’s important to keep an eye on third-quarter earnings reports.
Fed policy will continue to dictate the price of bitcoin
Federal Reserve Chairman Jerome Powell will speak after the November 2 meeting of the Federal Open Market Committee on US monetary policy, inflation and the upcoming interest rate hike.
According to Lunde, there are two scenarios to watch out for:
Scenario 1: Jerome Powell remains resilient in the fight against inflation and prepares the market for further growth. In my opinion, this is the most likely scenario. In this environment, I expect the correlation between BTC and other asset classes to remain high and the current 4.5-month trading range to remain unchanged with reduced activity, leading to longer-term favorable conditions for Sato accumulation.
Scenario 2: Jerome Powell gives subtle clues. In this scenario, I see a softening of the correlated market environment. Last week, we saw that the unique structural market activity associated with cryptocurrencies caused correlations to drop due to a significant short squeeze. Pivot predictions will lead to a similar backlash and this will spice up the BTC digital gold narrative.”
According to the second scenario, some analysts believe that the cryptocurrency may begin to diverge from US stocks. This reaction may reflect the reaction of the crypto market, which pushed the price of Bitcoin above $20,000 in mid-2020.
What is expected in the long term?
In the long term, Lunde predicts that Bitcoin and digital asset adoption will continue to be an uptrend. Pointing to the Fidelity survey showing increased interest from institutional markets in 2022, Lunde continues to push the current BTC price higher.
Although Bitcoin has fewer transactions on the network, greater participation is possible in the long run thanks to a clearer regulatory framework. A clearer structure could eventually emerge if U.S. voters start taking cryptocurrency politics into account when voting.