Bitcoin (BTC) prices have dropped by 6.6% to
$61,600, though they have rebounded slightly from their weekly low of $60,130.
This places BTC dangerously close to breaching the key support level of
$60,000-62,000, marking an unexpectedly negative start to "Uptober,"
a month traditionally known for its strong performance in the crypto market.
Historically, Bitcoin has gained an average of 20.0% in October and as much as
27.5% in October over the last four years. This contrasts sharply with the 6%
decline on the first day of this October.
Investors were enthusiastic in September, as
Bitcoin rose by 7.9%, defying the usual downward trend for the month. However,
this momentum was disrupted when Federal Reserve (Fed) Chair Jerome Powell
unexpectedly shifted his outlook, suggesting that the U.S. economy was strong
enough to allow for a quarter-point interest rate cut in November. Powell's
unpredictability has become somewhat legendary, but this latest shift took many
by surprise. As a result, the probability of a rate cut in November dropped
from 53.3% to 35.0%, impacting market sentiment.
Crypto investors were overly optimistic, with
Bitcoin closing September 30 down by 3.3% to $63,670, expecting a rally in
October. However, this didn't materialise, largely due to geopolitical tensions
after Iran launched over 180 ballistic missiles at Israel. The attack resulted
in the death of one civilian in Jericho and injuries to two others in Tel Aviv.
In response, Israel vowed swift retaliation, adding to fears of a broader
regional conflict, particularly following recent assassinations of Hezbollah
leaders and the Israeli ground invasion of Lebanon. Oil prices surged in the
wake of the missile strike, continuing to climb.
Despite these challenges, institutional
investors remain active in the crypto space. BlackRock's IBIT, Fidelity's FBTC,
and Grayscale's GBTC funds reported net inflows of $448.8 million last week,
double the previous week's amount, with an additional $260.8 million in the
first few days of this week. These inflows suggest that large investors are
buying the dip, indicating confidence that the Middle East conflict may not
have a lasting negative impact on the crypto market.
From a technical perspective, the broader
crypto market outlook remains positive as long as Bitcoin holds above the
crucial support level of $60,000-62,000 per coin.