The first part of October has been negative for the crypto market, with the bitcoin price correcting below the major resistance of $29,000 and altcoins still lethargic after retracing 61.8% of their annual rebound. In the short term, stock market arbitrage is keeping prices under pressure.
Bitcoin (BTC) falls slightly
What had to happen, happened. After clearly outperforming all asset classes in September (equity market, credit market, precious metals market), cryptos have been underperforming since the beginning of October.
This phase of relative underperformance is all the more surprising given that the traditional correlations of the Bitcoin (BTC) price should have supported it in the short term, in particular the decline in the US dollar and nominal interest rates.
In my opinion, this correction in crypto prices at the beginning of October comes as no surprise. The Bitcoin price, despite an interesting bounce off the pivotal $25,000 support, has never been able to “get out of the way”. The term is not chosen at random; I’ve used it several times in my previous articles over the past few weeks.
As expected, major technical resistance at $29,000 continued to act like a leaden screed over the market, eventually sending it back on the ropes.
The stock market had a lot to do with it
But more generally and beyond this graphical aspect, I think this short-term correction has stock market sources. The various asset classes are acting like communicating vessels, and the most important of these has been attracting capital since the resurgence of conflict in the Middle East.
The immediate geopolitical tensions have created a “flight to quality”, a massive movement of capital towards the bond market, playing to the full its safe-haven aspect. This market was also boosted in the short term by “dovish” statements from certain members of the Federal Reserve (FED), suggesting that the FED will not be raising rates at its next meeting in November.
Add to this the rebound in the price of gold, and you have the reasons for the crypto market’s correction
Chart representing the price of the 20-year US government bond in monthly Japanese candlesticks
Crypto market price on the brink of technical collapse
While the bitcoin price is neutral between support at $25,000 and resistance at $29,000, other major cryptocurrencies are now at technical risk following the early October correction.
ETH/USD in particular is on the brink of a technical collapse at the $1,530 level, the former all-time high set at the end of 2017. The chart situation is also very tense on BNB/USD, which is threatening to fall below $200.
It is imperative that these two assets recover quickly to avoid giving a bearish signal that would inevitably spread to the entire crypto market. The next few sessions are therefore important from a technical point of view.
A chance of salvation may come from the US dollar’s short-term pullback on the forex market.
Chart showing Japanese candlesticks in weekly and daily data for the ETH/USD future contract
