Key takeaways:
Bitcoin has decreased by 4.3% in October despite its historically strong monthly performance.
The CME FedWatch tool indicates a 96.7% chance of a 25% interest rate reduction, sparking optimism.
Increases in spot Bitcoin ETF inflows and equities correlation suggest a possible rebound.
Bitcoin (BTC) has dropped 4.3% in October thus far, but the optimism around the month’s historically bullish trend remains strong. Since 2019, Bitcoin’s average gain in October has been approximately 20%, with a median approximately at 15%. Though this year’s performance is currently underwhelming, market participants are looking to shifts in macroeconomic policy for potential upward momentum.
The CME FedWatch tool shows a 96.7% probability for a 25-basis-point cut in Federal Reserve interest rates. A reduction in interest rates typically implies more liquidity in the system, which lowers borrowing costs and promotes a risk-on sentiment across asset classes, including cryptocurrencies like Bitcoin.
Institutional inflows appear to be pre-emptively aligning with this narrative. Spot Bitcoin exchange-traded funds (ETFs) have seen nearly $5 billion in net inflows in the first two weeks of October, reflecting renewed confidence from significant investors.
Moreover, Cointelegraph reported that total institutional holdings across public corporations have now reached $117 billion, increasing by 28% quarterly, with over one million BTC collectively stored in corporate treasuries. In Q3, 48 new entities joined this group, further expanding institutional engagement with digital assets.
Related: Bitcoin to $74K? Hyperliquid whale opens new 1,240 BTC short
Stock correlation indicates Bitcoin’s next move
Bitcoin’s current downturn is also tied to the US equities market. Macroeconomic analyst Jesse Colombo noted that Bitcoin’s 92% correlation with the Nasdaq makes it a “leveraged play on tech stocks.” This was evident last Friday when the S&P 500 fell by 2.7%, the Dow Jones by 1.9%, and the Nasdaq 100 Composite by over 4.2%, their largest daily drops since April, pulling Bitcoin down with them.
The sell-off originated from renewed trade tensions between the US and China, following reports of potential 100% tariffs on Chinese imports, which unsettled risk sentiment. However, as markets calmed earlier this week, US stocks started to recover, although Bitcoin’s rebound has been slower.
According to Fidelity’s Director of Global Macro, Jurrien Timmer, the recent decline resembles the late-1990s “super bull” phase, when speculative assets experienced sharp but temporary setbacks before rising significantly again.
If US equities can maintain their recovery as earnings season approaches, it could create favorable conditions for Bitcoin to regain some momentum. A renewed rally in tech and growth stocks, supported by a more lenient monetary policy, could help extend “Uptober” optimism into a stronger conclusion for the month.
Related: Bitcoin metric shows ‘euphoria’ as $112.5K BTC price squeezes new buyers
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
