Some experts believe cryptocurrencies might decouple from US stocks, like in mid-2020 when the price of Bitcoin exceeded USD 20,000. Lunde thinks adopting BTC and other crypto assets will remain an emerging trend in the long term.
Analysts are examining the most prominent movements of the market in October when Bitcoin (BTC) grew by just 5.89%. Vetle Lunde, a senior analyst at Arcane Research, mapped out the likely direction of cryptocurrencies in the short term.
A common topic on Twitter was Uptober, a reference to the historic bullish performance of Bitcoin in October. Lunde considers that may have occurred again as data shows that BTC and exchange tokens exceeded the large-cap index.
The acquisition of Twitter by Elon Musk drove the large-cap index above Bitcoin, which achieved a 20% monthly gain. Over the last week, Dogecoin (DOGE) grew by 114%, which helped consolidate large capitalization companies.
In October, higher trading volume and lower volatility boosted the Bitcoin spot market, which benefited from a brief contraction. During the last week of October, Lunde observed the highest cryptocurrency short settlement volume occurring since July 2021.
That activity allowed Bitcoin to rise by only 6%, but Ether (ETH) and BNB (BNB) increased by 18% and 19%, respectively.
Although the short contraction provided an overall boost, Lunde concluded it did not change the price of Bitcoin significantly. The spot volume of BTC has risen by 46% over the last week, while the 30-day volatility index reached a two-year low. Besides, the 7-day volatility index and the annual average are 2.2% and 3%, respectively.
According to Lunde, investors should approach the Bitcoin market using short-term dollar cost averaging rather than leverage. Since the volatility of BTC dropped considerably, closely following the US stock market, investors should keep an eye on previous earnings reports.
The Bitcoin Price Still Depends on the Policies of the Fed
After the Federal Open Market Committee meeting, Jerome Powell will speak on US monetary policy, inflation, and the next rate hike.
According to Lunde, the chairman of the Federal Reserve (Fed) may prepare the market for further hikes to fight inflation. He thinks correlations between BTC and other asset classes may remain high while the 4.5-month trading range holds firm.
The analyst also believes Powell may provide subtle pivotal clues, which might cause related market environment weakening. He said a reduction in the crypto-related structural market activity led correlations to decline substantially.
Some other experts consider cryptocurrencies might decouple from US stocks, mirroring the crypto market in mid-2020. At that time, the price of Bitcoin rose far above USD 20,000.
The Outlook of the Price of Bitcoin in the Long Term
Lunde thinks adopting Bitcoin and other crypto assets will remain an emerging trend in the long term. Since a survey conducted by Fidelity indicated an interest in institutional markets increased in 2022, he is still bullish about BTC.
Although Bitcoin has fewer on-chain transactions, there might be more long-term participation with clearly-stated regulations. If US voters consider policies on cryptocurrencies during the elections, a clearer picture might emerge.
The weak growth of Bitcoin, its correlation with stocks, and a bearish trend for almost a year remain threatening. However, many analysts consider the current price of the pioneering cryptocurrency undervalued.
By Alexander Salazar
