Key Points:
Despite Bitcoin's historically strong monthly returns, it fell by 4.3% in October.
The CME FedWatch tool shows a 96.7% probability of a 25 basis point rate cut, sparking optimism.
The inflow of funds into spot Bitcoin ETFs and the correlation with stocks suggest a potential recovery.
This month, Bitcoin's price has dropped by 4.3%, but the market remains optimistic about Bitcoin's strong performance in October over the years. Since 2019, Bitcoin's average increase in October has been nearly 20%, with a median return of about 15%. However, this year's performance is lagging, and market participants are closely monitoring changes in macroeconomic policy, looking forward to new driving factors.
The CME FedWatch tool indicates a 96.7% probability of a Federal Reserve rate cut, expected to be 25 basis points. Rate cuts typically mean increased liquidity and lower borrowing costs, which help boost sentiment for risk assets, including Bitcoin.
Institutional inflows have already positioned themselves for this expectation. Spot Bitcoin ETFs saw nearly $5 billion in net inflows in the first two weeks of October, indicating increased confidence among large investors.
According to Cointelegraph, institutional holdings of publicly listed companies have now risen to $117 billion, a quarterly increase of 28%; the total amount of Bitcoin held by corporations has also exceeded 1 million. In the third quarter, 48 more institutions entered the market, further enhancing institutional influence in the digital asset space.
Bitcoin's recent weakness is also related to the performance of the U.S. stock market. Macro analyst Jesse Colombo noted that Bitcoin has a high correlation of 92% with the Nasdaq, which can be seen as a "leveraged play on tech stocks." Last Friday, the S&P 500 index fell by 2.7%, the Dow Jones index dropped by 1.9%, and the Nasdaq 100 index declined by more than 4.2%, marking the largest single-day drop since April, with Bitcoin following suit.
Media reports indicate that this sell-off was triggered by escalating U.S.-China trade tensions, with the U.S. planning to impose a 100% tariff on Chinese imports, dampening risk appetite. However, the market stabilized early this week, and U.S. stocks began to recover, although Bitcoin's rebound has been relatively lagging.
Fidelity's global macro director Jurrien Timmer stated that the recent pullback is similar to the "super bull market" phase of the late 1990s, when speculative assets experienced significant but brief retracements before rallying strongly again.
If U.S. stocks can continue to recover during earnings season, it could create favorable conditions for a Bitcoin rebound. With loose monetary policy driving growth, tech and growth stocks are expected to rise again, helping to extend the optimistic sentiment of "Uptober" into the end of the month and pushing Bitcoin to a strong close.
Related: Opinion: The Maturity of Cryptocurrency Requires Systematic Discipline, Not Speculation
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