Bearish Bets Intensify as Cryptos Lose Momentum

The narrative surrounding "Uptober" has concluded, and the risk adjustment that has been developing since late last week persisted as Bitcoin fell below $108,000 at the start of November.

Last month's overarching theme of Uptober benefited the majority of risk assets, except for cryptocurrencies, while safe-haven assets such as gold and the dollar also performed well.

October presented a complex landscape for market participants, with geopolitical tensions, trade risks, a US government shutdown, and elevated valuations to consider.

In the end, what triumphed was faith in corporate America and the expectation that interest rate cuts would sustain profit growth.

The recent surge on Wall Street has been invigorated as the month ended, living up to its reputation for volatility. In the global markets, cryptocurrencies and crude oil experienced the most significant declines in October.

Following a remarkable peak of $125,500 in September, Bitcoin experienced a decline, finishing last month more than 4% lower, dropping below $110,000. The crypto market has yet to bounce back since the significant downturn on October 10, which resulted in the liquidation of an unprecedented 20 billion dollars, affecting over 1.4 million traders.

Gold, too, experienced a notable decline from its peak of $4,380 per ounce. Still, the yellow metal has demonstrated impressive performance, rising over 50% year-to-date and concluding last month with a 3.6% increase.

The dollar concluded its second-best month of the year, as the absence of official data complicated the outlook for the US Economy and the trajectory of the Federal Reserve's interest rates.

The S&P 500 experienced a 2.3% increase in October, achieving its sixth consecutive month of gains, which represents the strongest performance for the index since August 2021.

The tech-heavy Nasdaq also showed seven consecutive months of positive returns, marking its longest streak since early 2018, supported by the robust balance sheets of major tech companies and optimism surrounding AI advancements.

The substantial rally of $17 trillion from the lows in April has propelled the S&P 500 to nearly 40% gains, representing the benchmark's most significant period of growth since the 1950s.

If past performance is any indication, November marks the beginning of the most favored six months for the financial markets.

Moves & Factors

Traders also noted that immediate drivers included a robust dollar and diminishing confidence in a faster easing cycle. In light of recent remarks from US Federal Reserve officials suggesting a prolonged path to policy relief, the sentiment remained prudent.

Tech results have shown a continuous dedication to AI developments, which boosted Asian stocks' neutral to bullish outlook.

The continued volatility in the Bitcoin market, however, suggests investors are being more cautious. According to different trading desks, the market had less liquidity because Tokyo was closed for a holiday, which caused intraday volatility to be heightened.

Strategic placement and deployment of capital also played a major role.

After September's solid performance, the market's Uptober trend ended, and some started calling October a "Red October."

November Start Not Ideal

A less-than-ideal start to November has resulted from this shift in attitude.

The main emphasis in macroeconomics remained on expectations about policy. Long positions were vulnerable due to increased leverage up until October, and traders said that forced unwinds drove spot levels down as prices fell.

Adjustments to market attitudes in response to the Fed Chair's warning about December rate cut expectations and the lack of data from the US government shutdown, now in its second month.

The comments by Powell after last week's meeting, in which he hinted that a December decision was "not a foregone conclusion," discouraged traders from placing bold dovish bets.

He also said the Fed was driving in the fog without economic data frozen due to the impasse in Washington on the spending bill.

The relationship between cryptocurrency and daily data has become more pronounced, moving away from a singular policy narrative.

This shift was evident as the likelihood of imminent rate cuts varied during Powell's press conference before ultimately finding stability at a lower chance.

Cross-asset indications were not very obvious.

The global stock market has tried to build on last week's gains, but despite good news, the crypto market remains unenthusiastic, which may be due to investors' lingering worries about leverage and their cautious approach to policy timing.

There was no clear catalyst for digital assets as the news surrounding the US-China pact remained mostly consistent with predictions.

Interest rates, dollar strength, and investor positioning were the main points of focus in the market.

On the other hand, optimists pointed to the blockchain's resilience and the generally good mood that November brings.

Bitcoin price is again declining, with the OG token trading below $108,000 after failing to breach the $110,000 resistance during the latest leg up.

The OG token is set to continue moving down if it trades below the $107,400 zone.

According to Trading View, around the $107,400 mark, which is also the 76.4% Fibonacci retracement level from the upward trend that started at the $106,312 swing low and peaked at $111,000, is where current support is found.

The $106,500 mark is the first major support.

Right now, the $105,500 area is where you may find the upcoming support level. The $104,200 support level may be reached in the near future if the price continues to fall.

If Bitcoin drops below the key support level at $103,500, it might have trouble establishing a short-term rebound.

AI Tokens a Drag

The crypto market experienced significant selling pressure, with the artificial intelligence subsector declining by 4.8% over the past 24 hours.

A 4% increase was recorded by 0G, while both Virtuals Protocol and ChainOpera AI experienced declines exceeding 10%.

As Bitcoin hovers below $107,000 and Ethereum dips below $3,800, both cryptos remain within a defined range.

The overall sector experienced a decline of approximately 2%, yet individual segments displayed varied performance.

Dash surged more than 33% in the PayFi category, ICP increased by 20% within Layer 1s, and zkSync saw a rise of over 30% in Layer 2s.

During this period, a prudent market outlook led to a decline in meme and DeFi tokens.

Elsewhere

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