Bracing for a Bearish October: Analyzing Downtrends in Crypto and Stock Markets
Crypto News – Bearish sentiments are gaining momentum in both the crypto and stock markets, with major US indexes confirming a downtrend. Historically, October tends to be a challenging month for markets, hinting at potential challenges before any substantial gains.
The US stock markets have experienced a decline over the past two months, and this downward trend is likely to persist into October.
Will Crypto Markets Follow Suit?
The Nasdaq, representing the technology sector, has dipped below its previous low in August, establishing a new lower low this week. Notably, the downturn, confirmed by crypto analyst “Cold Blooded Shiller,” commenced in mid-July.
During this period, the Nasdaq Composite Index, heavily weighted towards technology, witnessed a 9% drop to 13,063, where it settled at the close of trading on September 26.
In addition, the Dow Jones Industrial Average has witnessed a 5.6% decline since the start of August. Correspondingly, the broader S&P 500 Index has mirrored these moves, falling nearly 7% since the onset of the downtrend in early July, closing at 4,273 after the bell on Tuesday.
Furthermore, the S&P 500 has descended by 340 points since the Fed removed the term “recession” from their forecast, as outlined in the Kobeissi Letter. The letter noted that the Fed marked the precise high in the S&P 500, which has now hit its lowest level since June.
“Since then, rate cut expectations were pushed out by a year, and corporate bankruptcies hit their highest levels since the pandemic,” the letter added.
Several prominent banks followed the Fed in retracting their recession predictions, yet the markets seem to remain defiant.
While crypto markets have shown some correlation with tech stocks this year, they have largely remained in consolidation. After an initial surge in growth during the first quarter, crypto markets have plateaued since mid-March, experiencing a 19% drop since their peak in mid-April, indicating a clear downtrend.
Anticipating a Challenging October
October traditionally stands as the most volatile month of the year for both US and global markets. With an already confirmed downtrend, it’s probable that things will slide further into the red next month, encompassing the crypto sphere.
The historical record of market crashes during October designates it as the most feared month on the financial calendar, featuring events such as the Bank Panic of 1907, the Stock Market Crash of 1929, and Black Monday 1987.
In the 2022 bear market, crypto markets remained relatively stable for most of October, showing marginal gains towards the end of the month. Conversely, during the bullish market of 2021, crypto witnessed substantial gains in October, while 2020 mirrored the flat trend observed in 2022.
In 2019, a brief surge occurred at the end of October, only to be entirely nullified the following month. The bear market of 2018 similarly experienced a stagnant October.
Reflecting on historical patterns, it’s plausible that crypto markets might maintain a relatively flat trajectory next month. However, it’s essential to be mindful that November typically introduces significantly more volatility for this asset class.
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