Research report outlines why cryptocurrency markets may be on the verge of a reversal

As November begins, analysts are busy dissecting the major market moves that occurred in October. While Bitcoin (BTC) remained relatively unchanged in October, up just 5.89%, Arcane Research senior analyst Vetle Lunde painted a picture of the direction the market could take in the coming months.

“Uptober,” a reference to Bitcoin’s bullish historical performance in October, was a common theme among many threads on Crypto Twitter, which, according to Lunde, appears to have happened. Data shows that as of October 26, BTC and exchange tokens have outperformed the large-cap index.

Elon Musk’s Twitter takeover helped propel the large-cap index past Bitcoin, with a staggering 20% ​​monthly gain. Dogecoin (DOGE) has rallied 144% over the past seven days, helping to solidify the strength of large-cap stocks.

Weighted index performance for October 2022 performance.Source: Arcane Research

The Bitcoin spot market in October was boosted by higher volumes and lower volatility, while benefiting from a short squeeze that briefly lifted the market. According to Lunde, the last week of October saw the largest cryptocurrency short liquidation since July 26, 2021.

While the activity helped push Bitcoin up 6%, ether (ETH) and Binance Coin (BNB) rose 18% and 19%, respectively.

7-day average BTC USD daily volume with and without Binance.Source: Arcane Research

The bear squeeze helped lift the overall picture, but Lund concluded that the momentum had not caused a major change in BTC prices. BTC spot trading volume is up 46% over the past 7 days, and the 30-day VIX is at a 2-year low. In addition, the 7-day volatility index was 2.2%, compared to the annual average of 3%.

30-day and 7-day volatility for BTC.Source: Arcane Research

In comparing volatility to previous bear squeezes and the most recent bear squeeze, Lund said:

“With the market rushing higher, the squeeze on July 26 had a 15% daily high and low, while on October 25 and October 26, the daily high and low were 5% and 6%, respectively. Also, the momentum has stalled. , suggesting that traders should brace for a longer consolidation.”

Lunde said that while bitcoin is priced attractively, the best way to enter this market is to reach dollar cost averages in the short term rather than using leverage. Bitcoin has been experiencing uniquely low volatility and closely follows the U.S. stock market, so it’s important to track the third-quarter earnings report.

Fed policy will continue to determine Bitcoin price

Federal Reserve Chairman Jerome Powell will speak on U.S. monetary policy, inflation and the upcoming rally after the Nov. 2 Federal Open Market Committee (FOMC).

According to Lunde, there are two situations to be aware of:

“Scenario 1: Jerome Powell remains shrewd in fighting inflation and primes the market for further gains. In my opinion, this is the most plausible scenario. In this environment, I would expect BTC Correlations with other asset classes will remain elevated, while the 4.5-month trading range is now firm and activity is subdued, leading to a more durable environment of opportunity to stack seats.”

“Scenario 2: Jerome Powell provides subtle pivot cues. In this scenario, I see the underlying market environment softening. Last week, we saw how uniquely structured cryptocurrency-related market activity passed through massive shorts The squeeze caused the correlation to fall. The pivot is expected to cause a similar reaction and reinvigorate BTC’s Crypto gold narrative.”

In the second scenario, some analysts believe that cryptocurrencies may begin to decouple from the U.S. stock market. This reaction likely mirrors the cryptocurrency market’s reaction to push Bitcoin’s price above $20,000 in mid-2020.

what will happen in the long run

In the long run, Lunde predicts that the adoption of Bitcoin and Crypto assets will continue to be an emerging trend. Lunde noted that a Fidelity survey showed increased interest from the institutional market in 2022, and Lunde remains bullish on BTC at current prices.

While Bitcoin has seen less on-chain transactions, it is possible in the long run to increase participation through a clearer regulatory framework. If U.S. voters start thinking about cryptocurrency policy when they vote, a clearer framework could eventually emerge.

Bitcoin’s slow growth, correlation with stocks, and nearly a year-long downward trend remain a threat, but many analysts believe Bitcoin’s current price is undervalued.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Every investment and trading move involves risk and you should do your own research when making a decision.

Source of information: Compiled from COINTELEGRAPH by 0x information.The copyright belongs to the author Kyle White, and may not be reproduced without permission

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