‘Moving pump definition’ — 5 things to know in Bitcoin this week

Bitcoin (BTC) heads into a new week, trying to set new October highs, but worries about market sustainability are everywhere.

BTC's price action has tested $64,000 after the weekly close, but high levels of leverage are keeping watchers skeptical. A slew of macro data publications has been fraught with volatility in a week. Onchain data suggests long-term holders of Bitcoin are reducing risk this month. Leverage and open interest both increase sharply as short-term holders are under the microscope. Has Uptober been cancelled? Some views confirm that BTC/USD will bounce back in time for the monthly close.

The use of woes will destroy BTC's price recovery

Bitcoin gained momentum in the weekly close, hitting a high of $63,975 on Bitstamp, according to data from Cointelegraph Markets Pro and TradingView.

While encouraging on paper, BTC's price action has resulted in more skepticism than support among traders.

The reason, they agree, is leverage – increasing market bets are causing an inorganic price rally to disappear in an instant.

Analyst JA Martin, a contributor to onchain analytics platform CryptoQuant, described recent performance as “the definition of a moving pump.”

Analyzing the market structure, popular trader CrypNuevo has identified $63,800 as a potential short-term reversal point.

“I think I see this as an opportunity because there could be a few potential triggers here, like bad economic data or news of an escalation of the war,” he explained in an Oct. 6 thread on X.

CrypNuevo warns that the coming week will be difficult to trade thanks to several volatile curve balls.

Still, Keith Allan, founder of Marketing Resources Material Indicators, thinks a retracement of the 21-week simple moving average (SMA) at $62,800 is a good sign.

“A successful campaign puts BTC in a good position to go after the 200-day MA and the 2021 mid-cycle high,” he told X followers.

“A failed campaign shows more time in the region and the ability to retest the support.”

The 200-day SMA is currently at $63,566.

CPI week will see markets abandon bets on a 0.5% rate cut.

The most recent week of US macroeconomic data includes the September publication of the Consumer Price Index (CPI) and the Producer Price Index (PPI) along with unemployment claims.

After last week's surprising employment contraction, markets expect the CPI to be treated with particular interest with a month to go until the Federal Reserve's next decision on interest rate changes.

Data from CME Group's FedWatch Tool currently sees the Fed cutting rates at 0.25% on November 7 – a stark contrast to market bets a week ago.

Until the start of the employment print, a big 0.5% cut was a clear possibility, a result that is now completely off market expectations.

“The November 50 basis point price was almost fully repaid last week, but that could change,” trading resource Kobeisi wrote in a recent X cover letter.

Analyzing U.S. financial conditions, Kobayashi continued to ease the earlier two-year run of inflation by one measure.

“Financial conditions showed their biggest year-over-year decline in 3 years and have returned to pre-interest rate hike levels. From October 2023, the Financial Conditions Index loosened at the fastest pace since March 2020, when the Fed cut rates to zero.”

“Effectively, restrictive federal policy and interest rates will be lifted from March 2022. This will come with another 75+ base rate cuts to market value in 2024 alone.

As a result, analysts suggest the Fed may be “moving too fast” even with policy easing.

The minutes of the September meeting, which brought about the first 50-basis-point rate cut, will be released on October 9.

Long-term owners can protect profits.

Bitcoin's “diamond hands” are showing signs of stress this month.

This includes the value of all coins owned by so-called “long-term holders” – entities that hold a certain amount of BTC for at least 155 days. According to research by onchain analytics platform CryptoQuant, the confirmed cap dropped by $6 billion last week.

“LTH's realized cap (blue) has recently dropped to a high of $6 billion ($19 billion to $12 billion), suggesting long-term holders may take profits or close long positions,” promoter Amr Taha said in a note. CryptoQuant's Quicktake blog posts.

At the same time, the equivalent metric cover coins owned by Bitcoin speculators, also known as short-term holdings (STHs), increased by the same amount. This, Taha said, suggests that these entities may be “taking more risks or increasing their buying positions.”

Meanwhile, active Bitcoin whales own more BTC than ever before.

CryptoQuant, which covers whale wallets active in the past 24 hours, calculates that their combined balances now total nearly 267,000 BTC – up from 75,000 BTC since early September.

Focus on the profit of the speculator

STHs are now in focus for another reason – their profit margins are becoming an early warning sign for the potential level of the crypto market.

In another Quicktake post on October 5th, contributor Percival noted that when leverage encounters a “thrust zone” – a time when open interest (OI) increases rapidly on exchanges – STH returns to trading profitability. This is measured by the STH Cost Output Profit Ratio (SOPR) metric.

‘Impulse zones' are important for the investor to maximize profits on long positions and minimize losses. Look for open interest between -10% and -8%. On September 24, it was down -8%,” explained Percival.

“Compared to past movements, ‘push zones' occur when the STH SOPR begins the recovery process and the average gain of these groups increases.”

With the benefit already on the radar of market watchers, when OI percentage change levels exceed one standard deviation, market corrections “start to begin,” he said.

Bitcoin can still make an Uptober comeback.

The overnight BTC price push to $64,000 has at least turned the October monthly candle green again.

Related: Bitcoin Analysis Coinbase Premium Golden Cross Sees BTC Price Gains

While still treading water, BTC/USD is working to attract some bright comments from the trading and analytics community.

Among them is the famous trader Jelle, who at the end of the month observes the change in the market during the period, which is typical of the ongoing “Uptober”.

“Bitcoin is still following the same playbook as last year,” he argued in part in one of his recent X posts.

“Cutting months, late October. It will be low for the month, and a very exciting time to start.

Gel cited a seven-month period of consolidation that started after Bitcoin reached its all-time high in March. As Cointelegraph reports, the price has since been trying to break the cycle of lower highs and lower lows.

This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.