The Federal Reserve's interest rate meeting on October 28 is the top event of the month, as it will set the funding price for all assets. Currently, the market expects no change in interest rates. According to the CME FedWatch tool, traders of interest rate futures believe there is about an 87% probability that the Federal Reserve will remain on hold, with the next action more likely to occur in December. Of the 14 large brokerage firms surveyed on October 1, 13 expect the Federal Reserve to maintain its interest rate unchanged.

In normal times, a pause in rate hikes would be welcomed by holders of risk assets. When safe government bonds no longer offer increasingly high returns, speculative assets like Bitcoin become relatively more attractive. However, these are not normal times. Over the year until September, consumer prices have risen by 3.7%, with a monthly increase of 0.6% in September alone. Traders' eyes have moved beyond this Fed pause to subsequent possible actions. The futures market indicates nearly a 90% probability of a rate hike in December. The bond market corroborates this; the yield on the 10-year U.S. Treasury has hovered around 5.2% this month, having previously surpassed 5% in September for the first time since 2007. Producer prices are equally concerning: even excluding energy, they still rose by 5% over the past year.

The inflation data for September released on October 14 showed how sensitive investors have become. The data exceeded expectations, triggering a market reaction. U.S. stock futures dropped, and shares of Oracle, which heavily invests in AI data centers, fell more than 7%. Bitcoin dropped from around $83,800 to below $82,000 within hours.

Such a negative market reaction leaves Bitcoin investors with a tricky question. Long-term on-chain indicators that track the flow of coins between wallets show that Bitcoin is still in a bullish range. However, short-term indicators are flashing yellow. Should holders stay put, or take profits and wait for lower prices to buy back?

1. Signs of a Change

Reasons for caution come from both charts and a broader external environment. Bitcoin's technical indicators are cooling down, and its supply logic is weakening. The forces that drove the last bull run are now starting to form resistance.

1. Signals Turn Yellow

First, let's look at the trend model used in the original analysis. This model enters when a trend is confirmed, sells when the trend breaks, and keeps the proceeds in stablecoins until the next signal appears. The model turned bullish on July 20 when Bitcoin's price was $64,807. Since then, Bitcoin has risen about 26% to $81,595, but then stagnated. Meanwhile, the trend line of the model has been moving slightly upward daily and is currently at $79,654, less than 3% away from the current price. A small pullback would be enough to trigger a sell signal. This also raises a bigger question: should investors follow such signals?

Momentum indicators are pointing in the same direction. The weekly stochastic indicator measures the position of the price within a recent range. This indicator fell below 20% in August; this reading suggests that the market is oversold, and its recovery occurred before the current rally. Currently, the indicator reads about 90%, a level typically associated with overbought markets. Historical experience shows that when this indicator falls back below this level and simultaneously dips below its slow-moving average, it often signals a weakening trend. If the weekly close is below $82,000, this signal will be confirmed. Given the current inflation backdrop, the likelihood of this happening is quite high.

2. Half-Life Effect Diminishing

Bitcoin's own supply logic is not as reassuring as before. Past cycles were primarily driven by "halving." Halving refers to the planned reduction of the reward that miners receive for packaging new blocks by half, occurring approximately every four years, which halves the influx of new coins. Many holders still plan their positions around this rhythm, expecting the familiar four-year cycle to bring the next bull market as scheduled. However, such expectations may not hold up. Of the final 21 million Bitcoins, around 20.1 million have already been mined, with the annual issuance rate dropping from a stock of 12.9% to only 0.82%. A small trickle cut in half has a very limited impact. Investors relying on calendars may end up holding throughout a decline, waiting for a supply shock that has lost its potency. Nowadays, prices depend more on the macro environment and the flow of investors' funds, and these decisions often have little to do with the cryptocurrency itself.

3. Miners Under Pressure

One potential source of funds may come from the miners themselves. Miner wallets still hold nearly 1.8 million Bitcoins. Many miners have repurposed their cheap long-term electricity contracts, leasing computational power of data centers to artificial intelligence firms. While this move seemed prudent as AI stocks soared, it is not so anymore. The rising bond yields have pushed up borrowing costs needed for expansion, while falling stock prices have weakened the value of collateral. Selling Bitcoin from reserves may be the easiest way to finance expansion, and the market will have to absorb this additional supply.

4. AI Cycle Shifting

The broader AI trading environment is also teetering. The chip industry has always alternated between boom and bust, from the Windows PC craze of the mid-1990s to the cloud computing-driven storage chip boom of 2016 to 2018. The AI-driven upward cycle that began in 2025 had lifted Samsung Electronics and SK Hynix and boosted the Korean stock market. Since the peak in June, the Korean stock index has fallen by 41%. The decline coincided with Samsung completing an $11 billion share buyback and SK Hynix completing 89% of its $30 billion buyback program. Factors contributing to this include competition from China, revenue adjustments from OpenAI, and delays in Anthropic's IPO. Investors in Z.AI, a Chinese competitor listed in Hong Kong, see its stock price lag far behind major U.S. semiconductor indices.

5. From Oil Pumps to Ballot Boxes

Political factors create a closed loop. The U.S. midterm elections are set for November 3, with voters most concerned about the cost of living. Due to supply shortages caused by the war in Iran, gasoline and diesel prices remain painfully high. Polls show the Democratic Party is expected to win decisively, while many Democrats oppose building more AI data centers. Rising oil prices push up inflation, which in turn drives voters towards the Democratic Party, and a Democratic victory may slow data center expansion, a future that miners are betting on.

Positive Factors

However, this does not mean the bull market has ended. U.S. Treasury yields may have peaked. After the inflation data was released, the yield on the 10-year Treasury briefly exceeded 5.3% before pulling back, closing at 5.19%. It later dropped further to just below 5.1%, the lowest since late September, despite the inflation data being higher than expected. The yield’s decline in the face of inflationary pressure indicates that selling may have run its course. The recent rise in yields seems more like a temporary repricing than a lasting change.

Bitcoin has also shown surprising resilience. When the Federal Reserve raised rates in September, Bitcoin traded around $75,000 to $76,000, and has since risen above $80,000, while the Korean stock market, dominated by chip stocks, plummeted, and AI favorites like Oracle faced significant declines. Political factors may also provide a boost. Data from Bank of America shows that since World War II, the S&P 500 Index has recorded gains in the six months and twelve months following each midterm election, averaging about 13% and 14%, respectively. Since 1970, the index has averaged a 6.5% rise in the three months following elections, compared to an average of only 2.5% in the three months before elections. A rising stock market does not guarantee Bitcoin will rise alongside it, but as demonstrated by the market's response to inflation data, their recent trends have begun to align. Meanwhile, as long as Bitcoin holds around the $75,500 level, the long-term on-chain outlook remains bullish.

Hold or Exit

All of this leads back to the oldest debate in investment: to hold steadfastly or to time the market? Buy-and-hold strategies have many virtues. They are low-cost, easy to execute, and require no predictions. Most importantly, they ensure that investors participate in the market during a few key trading days, which often contribute a significant portion of asset gains. Bitcoin's history is filled with sudden sharp rebounds that reward steadfast holders; those who bought it 11 years ago and never sold are now reaping substantial benefits. For those with a long investment horizon and strong risk tolerance, holding steady can still be a sound strategy.

But the past five years have not been as rosy. During this period, the annualized return for buy-and-hold Bitcoin was about 8%. In contrast, the trend model that exits when prices dip below the trend line and re-enters when prices recover has yielded an annualized return of about 25%. The difference largely stems from avoiding losses rather than capturing gains. Bitcoin has been halved or dropped even deeper in bear markets, and a portfolio that falls by 50% needs to double to break even. Avoiding the most severe declines is more crucial than catching every rebound. The capital waiting on the sidelines doesn't need to be idle either. Depending on the products and terms, stablecoins can earn interest while holders wait for the next signal. Of course, past returns do not guarantee future performance.

Exiting and re-entering also has its costs. Trend signals can sometimes fail. If a sell signal is followed by a rapid market rebound, investors may have to buy back at prices higher than those at which they sold; in choppy markets, these false signals may appear continuously. Every buy and sell incurs transaction costs, and in some jurisdictions, involves tax liabilities. This method also requires investors to do what many find challenging: sell when the long-term outlook remains positive and buy back when market sentiment may be worse than before. Rule-based models are useful precisely because they make these decisions for investors.

Neither approach is always superior. Buy-and-hold works best during bullish markets with smooth and uninterrupted advances; trend-following excels when sharp declines interrupt rises. The current environment is closer to the latter: a structural upward trend remains, but inflation, rising yields, and pressured miners may trigger a sharp decline along the way.

Conclusion: Sell High, Buy Low

Evidence suggests that what is needed now is discipline rather than despair. If prices fall below the trend line, the model will prompt booking profits from the summer surge and holding stablecoins in wait for the next buy signal. If the bull market recovers, this signal will naturally emerge, allowing investors to re-enter with intact principal. This may feel like a loss of faith in the bull market, but a more accurate understanding is that this is a way to stay in the bull market. After all, one must first sell high in order to buy low.

BIT offers Bitcoin spot and derivatives trading, as well as fixed-income products, empowering investors to execute rule-based investment plans in both rising and falling directions, subject to applicable terms.

Glossary

1. Interest Rate Meeting (FOMC Meeting) - A meeting held by the Federal Reserve's Federal Open Market Committee, which is responsible for voting on interest rates. The committee meets eight times a year, and its decisions affect global borrowing costs, the U.S. dollar, and asset prices.

2. Interest Rate Futures - Contracts that allow traders to bet on the level of the Federal Reserve's benchmark interest rate at a future date. The CME FedWatch tool converts their prices into market probability estimates for various decisions during each meeting.

3. Consumer Price Index (CPI) - A monthly indicator measuring the change in prices of a basket of goods and services purchased by American households. The overall data includes food and energy; the "core" data excludes these two due to their volatility.

4. 10-Year U.S. Treasury Yield - The annualized return received by investors who buy U.S. government bonds maturing in ten years and hold them to maturity. It is seen as a benchmark "risk-free rate" for measuring other investments.

5. Producer Price Index (PPI) - A monthly indicator measuring the prices received by businesses for the goods and services they sell. Because businesses often pass on rising costs to customers, it can provide advance warning of price increases that will later appear in the CPI.

6. On-Chain Metrics - Indicators constructed based on data recorded by the blockchain itself, such as the duration of coin holdings, the purchase cost of holders, and the flow of coins between wallets. These metrics are used to assess Bitcoin's position in long-term cycles.

7. Trend Model - A rule-based strategy that follows the price direction. It holds assets while the price remains above a trend line (a reference level calculated from past prices) and sells when it breaks below.

8. Stablecoin - A cryptocurrency intended to maintain a fixed value (almost always $1), typically backed by cash and short-term government debt. USDT and USDC are the largest in scale.

9. Stochastic Indicator - A momentum indicator that compares the latest closing price to the highest and lowest prices over a set period, with values ranging from 0 to 100. The higher the reading, the closer the price is to the recent range's top.

10. Overbought and Oversold - Refers to markets that have risen (overbought) or fallen (oversold) too much too quickly, increasing the likelihood of a pause or reversal. On the stochastic indicator, readings above 80 to 90 are typically considered overbought, while below 20 are considered oversold.

11. Halving - The reward that Bitcoin miners receive for packaging a new block is cut by half per plan, occurring every 210,000 blocks, approximately every four years. Halving reduces the number of new coins entering the market.

12. Four-Year Cycle - The pattern where Bitcoin prices approximately reach highs and lows roughly every four years, generally synchronized with the halving schedule.

13. Issuance Rate - The percentage of new coins produced in a year relative to the existing stock, effectively indicating Bitcoin's own inflation rate.

14. Share Buyback - A process where a company buys back its shares from the market with cash. This reduces the number of circulating shares and often supports the stock price during the program's execution.

15. Semiconductor Index (SOX) - The Philadelphia Semiconductor Index, tracking major chip companies listed in the U.S., is a key barometer for price movements in the chip industry.

16. Midterm Elections - Elections held midway through the U.S. president's four-year term, where all seats in the House of Representatives and about one-third of Senate seats are up for reelection.

17. Timing - Attempting to buy before a price increase and sell before a decrease, rather than holding through each rise and fall.

18. Buy and Hold - A strategy to persistently hold onto assets after purchasing, regardless of short-term market conditions.

19. Bear Market - A period of sustained price decline, typically defined as a drop of 20% or more from a recent high.

20. False Signals - Indicator signals that are quickly reversed, such as a sharp market rebound after a sell signal is issued. These types of false signals may occur repeatedly in a choppy market and are sometimes referred to as "whipsaws."

Disclaimer

This article is adapted from the research of an independent analyst and supplemented by reports from the sources listed above. The views expressed belong to the original analysis and do not necessarily represent the views of BIT. This article is for reference only and does not constitute investment, financial, or trading advice, nor does it constitute an offer or solicitation to buy or sell any assets. Model results are based on historical analysis, and past performance does not guarantee future outcomes. Investment in digital assets carries a high risk, and readers should conduct their own research and consider their own circumstances before making any investment decisions.

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