Important points:
Bitcoin fell 4.3% in October despite historically strong monthly returns.
The CME FedWatch tool shows a 96.7% chance of a 25% rate cut, increasing optimism.
The correlation between Spot Bitcoin ETF inflows and stocks suggests a potential rebound.
Bitcoin (BTC) may be down 4.3% in October so far, but optimism remains on the month’s historic bullish trend. Since 2019, Bitcoin’s average October gain has been nearly 20%, with a median return of about 15%. Although this year’s performance is currently lagging, market participants are eyeing shifts in macroeconomic policy as potential fuel.
The probability that the Federal Reserve will cut interest rates by 25 basis points is currently 96.7%, according to the CME FedWatch tool. Lower interest rates generally indicate more liquidity flowing into the system, reducing borrowing costs and supporting risk-on sentiment across asset classes, including cryptocurrencies such as Bitcoin.
Institutional currents appeared to be at the forefront of this story. Spot Bitcoin exchange-traded funds (ETFs) have absorbed nearly $5 billion in net inflows in the first two weeks of October, showing renewed confidence from large investors.
Meanwhile, Cointelegraph reported that total institutional investor holdings across listed companies are now up 28% quarterly to $117 billion, with a combined total of more than 1 million BTC held in corporate treasuries. In the third quarter, 48 new entities joined the cohort, further expanding the agency’s reach into digital assets.
Related: Bitcoin to $74,000? Super Liquidity Whale Opens New 1,240BTC Short
Stock price correlation hints at Bitcoin’s next move
Bitcoin’s current weakness may also be related to the US stock market. Macroeconomic analyst Jesse Colombo said Bitcoin’s 92% correlation with the Nasdaq makes it a “leveraged play for tech stocks.” This was on display last Friday when the S&P 500 fell by 2.7%, the Dow Jones by 1.9%, and the Nasdaq 100 Composite by more than 4.2%, the steepest single-day decline since April, and Bitcoin fell as well.
The sell-off was fueled by the rekindling of trade tensions between the U.S. and China after risk sentiment was shaken by reports that 100% tariffs could be imposed on imports from China. However, as markets stabilized earlier this week, U.S. stocks began to recover, although Bitcoin’s rebound has been delayed.
Julian Timmer, director of global macro at Fidelity, said the recent pullback was similar to the “super bull” phase of the late 1990s, when speculative assets experienced a sharp but temporary decline, then rose again.
If U.S. stocks can maintain their recovery heading into the earnings season, conditions may be favorable for Bitcoin itself to recover. A renewed rally in tech and growth stocks, helped by easy monetary policy, could fuel Upover optimism and lead to a strong finish to the month.
Related: $112.5k BTC price squeezes new buyers, Bitcoin index shows ‘euphoria’
This article does not contain investment advice or recommendations. All investment and trading moves involve risk and readers should conduct their own research when making decisions.
