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Bitcoin's 'Uptober' Rally Begins With New ATH

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Bitcoin's 'Uptober' Rally Begins With New ATH

After a dismal September, Bitcoin's price surged over 12% last week to recover from the previous month's losses.

From July through September, other crypto tokens were the main drivers of substantial rallies; however, Bitcoin led the charge this time.

During that period, top alt coins, such as Ether and Solana, experienced significant increases of over 12%, while Bitcoin fluctuated at the edges to trade above $100,000.

Boost From Government Shutdown Risks

Th latest bull run in Bitcoin comes amid a US government shutdown that began on October 1 after an impasse between Democrats and Republicans on a short-term funding plan.

The already slowing US job market and, in turn, expected Fed rate cuts added to the sentiment.

That lines up with a surge in safe-haven gold to a new all-time high of above $3,900 an ounce, with $4,000 in sight and counting.

The shelter into safe havens is widely being called the 'debasement trade' and that is boosting cryptos.

When the government is closed, Federal workers are furloughed and money can't be spent. Included in this are a variety of government expenditure initiatives and salaries for federal personnel.

The doubts of a Fed cut from inflation have been thrown out of the window, and the market expects the central bank to ease this month due to the widespread belief that this scenario would cause economic uncertainty.

The CME Group’s FedWatch Tool showed that the likelihood of a US interest rate cut in October stood at approximately 89% as of September 30.

However, following the confirmation of the government shutdown late that afternoon, the likelihood escalated to 98%.

At that moment, Bitcoin started its swift upward trajectory after hovering around the $112,000 mark until then. From there, the OG token soared to a new high of $125,500 over the weekend and is hovering close to that level for now.

Bitcoin's 'Uptober' Rally Begins With New ATH
Source: CoinGecko

“Every time the dollar softens or government data is delayed, the market is reminded of the value of decentralised, borderless assets. Bitcoin’s appeal strengthens when trust in central authority is questioned, and right now, that trust is under heavy strain," deVere Group CEO Nigel Green said in a Sunday note.

The latest insights from FedWatch indicate that the market is anticipating four more rate cuts by June of next year. In light of the ongoing shutdown, the US Republican Party has announced plans to further reduce the federal workforce during this timeframe.

This action appears to be a strategic effort to finalize the reductions in the federal workforce that were not accomplished during President Donald Trump's first tenure.

However, Federal workers' unions have requested that such a move be blocked.

Still, should this endeavor prove successful, there is potential for a notable increase in the current US unemployment rate of 4.3%.

Given the current decline in non-farm payrolls, an increase in unemployment may compel the Fed to consider further reductions in interest rates.

Japan's Political Change Boosts Bitcoin

Sanae Takaichi, who has been a leading contender for prime minister of Japan, solidified her position on Friday by becoming the party's president. Many are hoping that she will take action to make the yen weaker.

Takaichi is expected to favor easing monetary policy, in contrast to her predecessor, Fumio Kishida, who was considering raising rates to combat inflation.

Elsewhere, this week’s focal point will certainly be the bond auctions conducted by the US Treasury on Monday and Tuesday. The upcoming two-day event will involve the issuance of $249 billion in short-term bonds by the Treasury.

Despite a government shutdown, it is likely that these auctions will proceed as scheduled, given historical patterns.

In the absence of government spending, there would be a significant decrease in the additional liquidity available in the market.

Over the course of just three days, Bitcoin's price has surged by over 10%. The duration of the uptrend amidst a temporary liquidity crunch remains uncertain.

ETF Flows Surge As Whales Get Back In

Top market players are making strategic moves once more, coinciding with one of the most substantial weeks for ETF inflows in Bitcoin and Ethereum.

Last week saw a resurgence in inflows for both Spot Bitcoin and Ethereum ETFs, with data indicating that several large holders are transferring their crypto assets from exchanges into self-custody solutions.

According to the on-chain tracker Lookonchain, newly established wallets have pulled significant quantities of Bitcoin and Ethereum from leading exchanges, indicating substantial accumulation by prominent market players.

Data from SosoValue indicates that Spot Bitcoin ETFs experienced inflows totaling $3.24 billion last week, marking a significant turnaround from the $902.5 million outflows recorded the week prior.

Last week’s inflow figure stands out as the highest weekly inflow recorded for Spot Bitcoin ETFs this year. Ethereum ETFs experienced inflows of $1.30 billion, marking a significant turnaround from the outflows of $795.56 million in the week prior.

Nonetheless, this endeavor extends beyond just Spot ETFs.

Recent wallet movements indicate a strong trend of accumulation among significant addresses transitioning into self-custody.

In a notable event, the on-chain analytics platform Lookonchain observed that a recently established wallet, designated as 0x982C, extracted 26,029 ETH, valued at around $118 million, from Kraken.

A recently established Bitcoin wallet, bc1qks, has executed a withdrawal of 620 BTC, amounting to $76 million, from Binance.

Both movements represent significant reallocations of capital away from exchanges, indicating that major players anticipate additional price increases.

Particularly noteworthy is the fact that Bitcoin exchange holdings have hit a five-year low.

Withdrawals from cryptocurrency exchanges have reached a 30-day high of approximately 170,000 Bitcoin, with the latest week seeing the greatest level of activity.

For the first time since January of 2021, the Bitcoin exchange balance is below 2.85 million BTC.

What's Next?

Bitcoin and Ethereum prices have already shown signs of the interaction between institutional inflows and large accumulation.

Bitcoin has surpassed its previous high, hitting a new record high of $125,506; it is currently trading at around $124,800.

Just one week ago, Bitcoin fell below $110,000, causing the Bitcoin Fear and Greed Index to plummet to its lowest point since March. This signifies a notable change.

In a similar vein, Ether is currently valued at $4,575 following a bullish trend.

If inflows into spot ETFs maintain their strength and significant accumulation persists, Bitcoin's upward trajectory may extend into the week.

Consequently, the price of Bitcoin could potentially hit $130,000 by the end of the week.

Nonetheless, a brief period of cooling remains a possibility. A potential decline in Bitcoin could see it revisiting the $120,000 mark before embarking on its next upward trajectory.

Maintaining an optimistic outlook, there is a possibility that Ether's price could surpass $5,000 in the coming weeks.

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