Bitcoin Returns to Near Year-to-Date Highs Amidst Lingering Support Concerns

Bitcoin Returns to Near Year-to-Date Highs Amidst Lingering Support Concerns

Crypto News – Bitcoin is once again approaching its year-to-date highs, yet there are concerns among analysts about the sustainability of this price rally. The last week of October has witnessed a 3% increase in the price of Bitcoin, which has lifted the broader cryptocurrency markets.

As we navigate through what some are dubbing an “Uptober” for Bitcoin and altcoins, BTC/USD is trading close to the 2023 high levels, signaling a resistance battle. The key question on everyone’s mind is whether the bulls can maintain their momentum.

Traders, however, are approaching this price surge with caution due to the significant resistance levels that need to be breached. Optimistic predictions about Bitcoin’s price are less prevalent, and many believe that surpassing the $32,000 mark will be neither quick nor easy.

Moreover, Bitcoin faces potential headwinds in the form of macroeconomic data releases, especially in a climate where inflation is consistently outperforming expectations. The United States Federal Reserve’s interest rate decision, scheduled for November 1, makes the final data releases of the month even more crucial. Geopolitical events are adding further unpredictability to the market.

With so much at stake for the cryptocurrency and risk asset markets, the week ahead appears to be shaping up as a rollercoaster ride. Bitcoin bulls are hoping for a significant shift in the trend as they aim for a breakout from a multi-month trading range.

RSI Casts Doubts on the Bitcoin Rally

As reported by Cointelegraph, some traders are treating these three-month highs with skepticism, anticipating challenges in breaking through the $32,000 barrier.

One popular trader, Daan Crypto Trades, commented on the situation, stating, “Well on its way towards the top of the 2023 range. $31K-32K won’t be easy to break through, but upon doing so, I would be targeting $38K next. Remains range-bound until then.”

In the hours leading up to the Wall Street opening, BTC/USD is showing signs of a retreat from its recent highs, heading back towards the $30,000 mark.

Analyzing the likelihood of a deeper pullback, another prominent trader, Ali, drew attention to the relative strength index (RSI) readings. He warned that “an impending price correction appears to be on the horizon unless BTC manages to close a daily candlestick above $31,560.” The RSI reached a level of 77 on October 23, a point at which Ali noted “sharp corrections” have occurred since March of that year. Typically, an RSI reading above 70 is considered “overbought.”

Despite these cautionary signals, some remain optimistic. Philip Swift, co-founder of DecenTrader and creator of Look Into Bitcoin, remains positive, while CredibleCrypto described a Bitcoin breakout as “almost there.” They suggest that breaking the $30,000 level is pivotal for a significant trend change.

Data Releases Ahead of the FOMC Meeting

This week, the U.S. macroeconomic calendar highlights the Personal Consumption Expenditures (PCE) Index data, which holds particular importance due to its role as one of the Federal Reserve’s preferred inflation metrics. The timing of these releases is noteworthy since the Federal Reserve is set to meet on November 1 to determine its interest rate policy. Despite recent data consistently showing higher-than-expected inflation, the likelihood of further interest rate hikes remains low. In fact, CME Group’s FedWatch Tool indicates a mere 1.6% chance of a rate cut by the Federal Open Market Committee (FOMC) next week.

Simultaneously, earnings season is in full swing, fueling speculation about the Federal Reserve’s actions. This environment of heightened volatility presents opportunities for traders, as observed by financial commentary resource The Kobeissi Letter.

U.S. Dollar Strength and Market Dynamics

Market observers are closely monitoring the strength of the U.S. dollar, with the U.S. Dollar Index (DXY) showing signs of cooling the rampant uptrend that began in mid-July. Analysts are looking for either a continuation of the current trend or a significant break in the coming week or into November. Expectations are building for a “major move.”

Declining Exchange Balances

The trend of decreasing Bitcoin balances on cryptocurrency exchanges has been a recurring theme, with balances now at levels not seen since 2018. According to data from the on-chain analytics platform CryptoQuant, major trading platforms collectively hold a balance of 2.024 million BTC. The FTX exchange’s issues in November 2022 accelerated the trend of reducing balances, and despite Bitcoin’s price recovery in the current year, this trend has yet to reverse.

At present, exchange deposits have reached year-to-date lows, indicating that coins are steadily leaving exchanges. This is a notable shift from the historical trend where deposits consistently exceeded withdrawals.

Reduced Influx of New Bitcoin Investors

A recent analysis by CryptoQuant using the Sum Coin Age Distribution metric revealed a lower number of new market participants in the past month. Historically, spikes in this indicator have marked turning points for Bitcoin’s long-term price. However, the current trend shows a lack of new market entrants, contrary to previous significant price lows in late 2018, late 2022, and post-March 2020 during the COVID-19 crash.

While no single indicator can fully explain market behavior, the data related to the age of coins in circulation is too substantial to disregard. It’s also worth noting that long-term holders now control a greater portion of the Bitcoin supply than ever before.

Crypto Fear & Greed Index Exhibits Signs of Volatility

After a prolonged period of minimal movement, the Crypto Fear & Greed Index is beginning to display signs of increased volatility. Over the weekend, the sentiment gauge spiked into the “greed” territory, reaching 63 out of 100, its highest reading since July 12.

This uptick in greed coincided with Bitcoin’s attempt to break through the $30,000 price level, underlining the significance of this price point in the minds of traders. Popular trader Altcoin Sherpa referred to $30,000 as a “scary area” and emphasized the importance of this price level in determining the cryptocurrency’s direction.

In conclusion, the cryptocurrency market is currently facing a pivotal moment as Bitcoin approaches its year-to-date highs. While some traders are cautious due to resistance levels and technical indicators like RSI, others remain optimistic about a potential breakout. Macro data releases and the upcoming Federal Reserve meeting add further uncertainty to the market, making the week ahead one of potential volatility. The decreasing exchange balances and the reduced influx of new investors also signal changing dynamics in the cryptocurrency market.