24 September  2024 · Block Height 862655 · Bitcoin Price $63K

Welcome back to the Blockspace Newsletter!

When bull? In today’s newsletter, we have a special guest post from trader Big Smokey that analyzes the factors that could lead to bitcoin’s next big leg up, and he addresses the question on every bitcoiner’s mind: is Uptober around the corner?

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Bitcoin’s all outta narratives, but maybe not for long

Bitcoin price whipsaws continue to dominate the market, with $65,000 standing as the hurdle to clear. With last week’s 0.50% Federal Reserve interest rate cut and Q4 looming around the corner, it could only be a matter of time before bitcoin reaches new highs. 

Over the last 6 months, bitcoin has been in a structurally ordered downtrend where on the higher timeframe price is making weekly lower highs, and futures-driven liquidations are the primary catalysts for each rally. Even last week’s move toward the range high didn’t break the trend, but a close over $65,500 would definitely raise eyebrows.

Bitcoin volatility compression leads to expansion 

Bitcoin volatility (Bvol) has been compressed as bitcoin’s price trades within a structured range. Historically, lengthy periods of suppressed volatility eventually lead to explosive price movements. Key the age-old wisdom: “Volatility compression leads to expansion.” 

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Bitcoin traders stack dry powder in stablecoins

While bitcoin’s price continues to range trade, the total market cap of all stablecoins has risen steadily as investors who have chosen to not aggressively trade during Bitcoin’s low volatility period have taken to the sidelines. Glassnode’s Stablecoin Supply Ratio metric sheds light on current trading sentiment. According to Glassnode:

“When the SSR is low, the current stablecoin supply has more “buying power” to purchase BTC. When the SSR is high, the current stablecoin supply has less “buying power” to purchase BTC.” 

Bitcoin price breakouts are driven by futures liquidations, but Q4 historicals, Fed rate cut could change this

A lack of sustained spot demand is another factor containing bitcoin in the current range. Bitcoin price rallies have been petering out as bids encounter a wall of asks near the top of the current trading range.

The bulk of bitcoin’s upside price action is driven by forced buying from futures market liquidations as momentum dries up, because there’s insufficient appetite to battle asks at resistance levels.

To wrap up, the day to day price action last week was exciting and encouraging, but bitcoin has yet to break out of what has become a six month trading range. Ideally, bullish traders will want to see a market where spot demand ticks up sustainably, rather than one that is driven by perpetual markets activity. Sustained spot demand could break the current range and push through the wall of asks in the $65,000 - $70,000 zone. 

Some potential positives to look forward to over the coming weeks: 

• How do equities markets, bonds, and corporations continue to react to the Federal Reserve’s newfound dovish stance and last week’s 50 basis point rate cut. 

• Will Q4 yet again be a bullish quarter for bitcoin? Here’s a chart from Capriole Investments in case you’ve forgotten how bananas Q4 can be…

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