Bitcoin enters the new week trying to set a new October high, but concerns about the sustainability of the market remain everywhere.
Leverage sabotages BTC recovery
Bitcoin accelerated over the weekend, reaching a high of $63,975. While this is encouraging on paper, traders appear to be skeptical of the rally, with most agreeing that the main reason is leverage – increasing bets on the market is creating an inorganic rally that is likely to disappear in an instant.
BTC/USD 1-hour chart. Source: TradingView
Analyst JA Maartunn, a contributor to blockchain analytics platform CryptoQuant, described the recent performance as “a leveraged rally.”
“I see this as a possibility because there could be some potential catalysts like bad economic data or escalating geopolitical tensions,” he explained, warning that the coming week will be difficult due to potential surprises.
BTC/USD 4-hour chart with 21-week, 200-day SMA. Source: TradingView
Despite this, Keith Alan, co-founder of trading firm Material Indicators, believes that the recovery above the 21-week simple moving average (SMA) at $62,800 is a good sign.
“A success would set Bitcoin up to pursue the 200-day MA and 2021 Mid-Cycle Top. Conversely, a failure would see the price spend more time in the range with a high probability of retesting the support level.”
The 200-day SMA is currently at $63,566.
Market abandons expectations of 0.5% rate cut
“A 50 basis point rate cut in November was almost fully priced in last week, but that could change,” trading source The Kobeissi Letter wrote on X.
Fed target interest rate probability (screenshot). Source: CME Group
Minutes of the September meeting, which delivered the first 50 basis point rate cut, are expected to be released on October 9.
Long-term hodlers “likely” to protect profits
“There has recently been a sharp $6 billion drop (from $19 billion to $12 billion) in the realized capitalization of LTH (blue), indicating that long-term holders are likely taking profits or closing long positions,” contributor Amr Taha noted in one of CryptoQuant’s Quicktake blog posts.
Bitcoin: Realized market capitalization of net positions of STH, LTH. Source: CryptoQuant
CryptoQuant data shows that the total balance of whale wallets last active within the past 24 hours now stands at nearly 267,000 BTC — an increase of 75,000 BTC since the beginning of September.
Active Bitcoin whale address balances. Source: CryptoQuant
Focus on speculator profits
STH is now in the spotlight for another reason – their profit margins are becoming an early warning sign of how leveraged the crypto market is.
CryptoQuant contributor Percival noted that when leverage hits a “momentum zone” — a period of rapidly increasing OI on exchanges — STH trading returns recover. This is measured by the STH spent output profit ratio (SOPR) metric.
“The ‘momentum zone’ is necessary for investors to maximize profits with long positions and minimize losses. See the OI fluctuate between -10% and -8%. On September 24, there was a -8% drop,” Percival explained. “Compared to previous moves, the ‘momentum zone’ appears when STH SOPR begins to recover to see the average profit of these groups increase.”
Change in Bitcoin futures OI percentage (screenshot). Source: CryptoQuant
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