October Cryptocurrency Market Observation The table is set, the bull market feast is about to begin.

October's Cryptocurrency Market Report The Stage is Set for the Bull Market Feast

Crypto market second-level fund Metrics Ventures October market observation guide:

1. Bitcoin market has the conditions for a bull market. The Bitcoin market has the prerequisites for starting a bull market, with a high proportion of long-term holders and a healthy chip structure.

2. However, it should be noted that we still believe that there will not be an immediate bull market as such. This round of market mainly relies on leverage funds, but a true bull market still requires new funds to enter. **Overheating will inevitably lead to adjustments. When leverage is cleared and the cost of holding coins falls to the moving average, it is still a very good time to increase positions.

3. The macro environment is favorable for the crypto market. **The trends of the US dollar index, unemployment rate, and US bond interest rates indicate that the macro environment will be more favorable for the crypto market. At the current moment, our focus will be on finding potential emerging market targets and observing the path and speed of incremental funds entering the market.

• Using gold as a reference, how will Bitcoin ETF drive the next wave of crypto bull market?
• LianGuai Daily | Proof Group is participating in the bidding for FTX’s relaunch plan; Ava Labs lays off 12% of its employees.
• The Grand Handover Traditional Finance Steals the Spotlight in Crypto’s Next Era

This article is a review and commentary on the overall market situation and market trends of the crypto asset market in October by MVC.

A false news triggered a real surge, causing Bitcoin to break through the bull-bear dividing line.

Things started going wrong on October 17th. After the false news of the ETF approval was debunked and deleted, the price of Bitcoin surprisingly stabilized and did not drop.

According to common sense, the rise caused by false news should be swallowed up after the debunking, as it would be influenced by the double pressure of trapped sellers and stop-loss buyers chasing the rise, possibly even hitting a new low. However, the price of Bitcoin remained stable for the next three days, which means that some on-exchange funds ignored the ETF news and started to enter the market firmly.

For the long-term trend of Bitcoin, **we generally refer to the weekly MA120 (120-week moving average) as the bull-bear dividing line.** When Bitcoin rises above the weekly MA120 after completing the previous bear market cycle’s decline, it can be regarded as the end of the bear market cycle. Similar time points can be referred to December 2015, April 2019, and April 2020. When Bitcoin’s price breaks through WMA120, there will be a considerable trend, even considered the starting point of a new bull market cycle.

The logic behind the bull-bear dividing line still lies in the logic of Bitcoin’s chip distribution. We repeatedly emphasized in the October report the necessary conditions for the start of a new bull market cycle, which is that the investment cost of short and long-term holders in the market must equalize. This way, after the bull market starts, there will be no selling pressure from historical trapped holders, only selling pressure from profitable holders, which can be absorbed by new funds.

The significance of WMA120 on chips can be roughly regarded as the comprehensive cost of long-term holders. Currently, the price of WMA120 is around $32,000, and at the time of writing this article, the market price is about $33,700. We believe that the chip structure of Bitcoin has already met the prerequisites for starting a bull market, which is also the meaning behind the title of this month’s report, “The dish is ready, just waiting to be served.”

From Glassnode’s data, we can see that currently, long-term holders holding for more than 155 days account for a whopping 76%+, while short-term holders with a holding period of less than 155 days mainly have a cost range between $29,000 and $30,000. Currently, the profit ratio exceeds 86%.

Although this data is constantly changing, the chip structure of the Bitcoin market has already indicated the current chip pattern: a high proportion of long-term investors holding positions with a strong willingness to hold, mainly at the cost range of $32,000 around WMA120. Currently, they are basically in a floating profit (Microstrategy’s weighted cost is also not easy to achieve a floating profit). Short-term investors have a smaller proportion of floating chips, mainly at a cost below $30,000. They are also currently in a floating profit. The current chip structure implies that the long and arduous bear market cycle of cutting losses and changing hands can now be declared over. Insiders have completed the process of cutting losses and building positions, and the height of the subsequent market largely depends on the willingness and speed of new capital entering the market. The new crypto cycle of 2025-2026 can be seen as starting from this month.

The chip structure of ETH is not as healthy as BTC’s. The short to medium-term cost for ETH investors is around $1,770, while the current market price is $1,788, just in a floating profit. On the other hand, the cost-intensive area for long-term ETH investors is around $2,200, and currently, ETH long-term holders are still in a trapped range, with significant selling pressure constraints. This is also fundamentally due to the recent bottoming process of the ETH/BTC exchange rate.

Many people feel that the market is moving too fast this time, but in fact, this round of the market is still a rapid leverage funding market and an oversold rebound in the market. According to Coinglass’s data on BTC open interest in the entire network, even on the day of the surge caused by false news on October 16th, the total BTC open interest was still very low at around 11.67 billion, and there was a relatively high short-long ratio and slightly negative funding rate. The low position was mostly short positions.

However, once the BTC price stabilized at $30,000, leverage funding skyrocketed. Within just two days, the total BTC open interest and residual funds in the entire network broke through the year’s high, reaching a level of 14.97 billion. The funding rate also hit the highest peak of the year, and the enthusiasm for longing surged.

What’s even more interesting is that on the day this article was written, Binance’s BTC open interest was about 3.7 billion, still not reaching the level of 4.54 billion in August. However, the main force behind the increase in leverage funding this round is CME, with OI rising from the peak of 2.33 billion in August to the recent 3.58 billion. BitMex’s OI increased from the highest point of 261 million in August to 300 million. Bitmex’s funding rate and premium have also reached the level of Bitcoin at $60,000 in October 2021. This round of enthusiasm from U.S. investors is evident.

In terms of market sentiment, there have been some interesting changes in October. We still remember the first two weeks of October, when there was suddenly a lot of talk about “crypto is dead” and “halving won’t bring a bull market.” When we discussed this with old friends, we couldn’t help but smile knowingly. It all seemed so similar to the deep bear market at the end of 2019, which convinced us to start buying at the bottom.

For ETH and altcoins, ETH is still lagging behind BTC. As for altcoins, this round of rebound seems to be purely an oversold bounce. The market hasn’t seen any particular themes or narratives, except for some projects announcing positive news like token economics transformation or changes in fee models. The biggest rebound is still in the oversold tokens that experienced a significant drop and hit new lows in November 2022. However, for fund-type investors, these oversold rebound tokens may seem to have a large price increase, but their actual liquidity is still weak, and they have low trading value.

Regarding the breakout above the WMA120 in the late bear market, after the first breakout in December 2015, there was five months of consolidation before the start of a one-way uptrend. After the first breakout in April 2019, there were two subsequent bearish moves in December 2019 and April 2020 before the start of a one-way trend.

From the perspective of chip distribution, BTC breaking above the WMA120 is a sign of the completion of the bear market turnover. However, there is still a certain time window before the start of a true bull market. During this time, the market consolidates turnovers at the WMA120 as the cost center, establishes a solid foundation, and waits for new capital to enter.

As for when and why new capital will come in, it is difficult to find answers from trading. The halving event could serve as a reference point. If there is still a chance for a pullback or falling below the WMA120 before the halving event, it will still be a promising opportunity to increase positions.

If the most common question in early October was “can it still go up,” the most common question we encounter now is “will it fall again.” We believe that the market certainly still has the potential for a decline. Compared to the Echo Bubble from January to August 2019, I believe we are currently in a similar position to January and February 2020.

The reason for this conclusion is that the period from January to August 2019 is actually quite similar to the period from January to August this year. Both periods followed the bottom of the bear market and the deleveraging and massive sell-off before experiencing an Echo Bubble, essentially a major short covering. The reason why there was a significant rebound from January to August 2019 was because many institutional investors were still bearish and heavily shorted in the range of BTC 6000-7000, providing fuel for the uptrend. Many investors who experienced 2019 should have a deep impression of this. Most of the profits made from the rebound at the beginning of the year were lost from June onwards due to short positions.

After experiencing emotional venting in August 2019, the market entered a 4-month correction phase. This phase is similar to the period from June to October 2023, both representing a retracement phase after short positions are covered, and a natural process of market turnover and chip accumulation. It’s just that because the rebound at the beginning of 2023 was relatively small, the correction didn’t appear as severe.

The reason why we believe that the current situation is more similar to the market scenario in January 2020 is twofold. First, we have gone through the process of short positions being covered and chip turnover. Second, the final short positions in the market have surrendered and closed positions below $33,000. The willingness and momentum to short are relatively small, and the halving time is approaching next year. The rush of funds has started, and institutional-level investors generally have low positions, leaving room for further increase. Therefore, the market better fits the characteristics of January 2020.

Since we are positioning the market situation to January-February 2020, many people may subconsciously wonder if there will be a “catastrophic” level of downturn next. First of all, looking at the chip structure, BTC has entered a new trading range of $32,000-$41,000, and according to the current yet to be accelerated potential, there is still a possibility of approaching the $40,000 level, and ETH also has the potential to rise towards the WMA120, which is around $2,200.

However, we still believe that there won’t be an immediate so-called bull market scenario, because the current market situation still depends on the accumulation of existing funds and leveraged positions. There is no data support for new funds entering the market at the moment, and the number of open contracts is high, with the panic sentiment index in the greedy range. Bitmex’s funding rate and contract premium are in the range of the 2021 bull market, and the periodic overheating of the market will certainly lead to the liquidation of leveraged positions. Once this round of market enters acceleration, there is still a very high chance of experiencing a significant deleveraging-induced downturn. When leveraged positions are cleared, and we observe a decrease in OI and fee rate data, it will still be a very good opportunity to increase positions when BTC price returns to the vicinity of the long-term cost moving averages.

As for when this downturn will come, we don’t want to easily predict it. From June to August 2019, the fee rate and contract premium rose continuously for two months, and the sentiment was even hotter than in a bull market, causing substantial losses to those who easily touched the top and continued to short. Even if the market enters the top of acceleration, it will still give us ample time window for thinking and decision-making.

We believe that starting from November, BTC’s chip structure has entered a state of preparing for a bull market. Before the halving next year, it is expected to continue with frequent oscillations, chip accumulation, and solid long-term holding cost. As for ETH, it still has to wait for a breakthrough of the WMA120. Whether it will fall or not, whether there will be a crash, and when leveraged positions will be liquidated, these are not the core contradictions. The core contradiction is how to buy smartly. At this moment, finding market targets that may become emerging tracks and observing the path and speed of incremental funds entering the market will be the focus of our research.

In addition to the market structure within the cryptocurrency market, we have also observed positive news at the macro level, especially in terms of funding. Whether it’s higher-than-expected unemployment rates, nearing the peak of US bond yields, or the high point of the US dollar index, all point to a macro environment that is more favorable for the cryptocurrency market. However, we believe that these factors are not as important. Many investors in October were reluctant to buy in, fearing that a decline in the equity market would impact risk appetite in the cryptocurrency market. But the cryptocurrency market has largely decoupled from the equity market. What we need to look forward to now is the innovation that the builders of the cryptocurrency market will present to us. Which ones will become entry points for new capital, thus opening up a new cryptocurrency bull market cycle.

The dish is ready; we just need to wait for it to be served.

In summary, this round of Bitcoin breaking through the bull-bear divide marks the end of the bear market. Both short-term and long-term holders have profited, and market sentiment has shifted from pessimistic to optimistic. The market movement is mainly driven by leveraged funds, but a true bull market still awaits fresh capital entering the scene. The key is to patiently accumulate leading assets and wait for incremental funds to sound the horn for a new bull market.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!