At the beginning of September, bitcoin price, which has crashed by more than 60% since its high last November, was poised for further downward movement. It bucked that script. Except for a brief surge in the middle of this month, bitcoin price mostly traded sideways and stuck to a trading range of around $20,000, its price at the start of the month.

As of this writing, it is changing hands at $19,371.15, up by around 1.30% from its price a day ago.  

But September was brutal in other ways for crypto markets as a surge of bad economic news continued to hammer away at its liquidity. Even Ethereum’s Merge, which converts its native token into “ultrasound” money, failed to move markets.

What will October bring?   

A Time for Recovery?

If past price movement is an indicator, this month should bring about an improvement in bitcoin’s price. For most of the past decade, it has increased in October in preparation for a November rally. For example, last October’s price increases set the stage for it to attain to a new price record in November.

There are exceptions to this pattern, however. 2018 was one. That year, crypto prices continued to plummet in October, crashing to a bottom of around $3,000 in December.

The current macroeconomic climate is conducive to a repeat of that performance. Last year’s bull run was fueled largely by a pandemic stimulus doled out by governments. The stimulus tap has run dry this year and the bull run has morphed into an arguable recession.

A war in Ukraine, rising energy prices, and runaway inflation present a gloomy macroeconomic outlook. More importantly, it is certain that the Federal Reserve will continue to raise interest rates and dramatically reduce risk in the economy, thereby further crunching crypto market liquidity.

The fundamentals of bitcoin’s ecosystem do not give much cause for hope either. Bitcoin’s cost of production fell to $13,000 in June this year after miners moved to more efficient mining rigs to boost profits and cut down on their electricity use. That means the cryptocurrency still has room to decline without putting them out of business.

Meanwhile, investors have slowed down their investments into the cryptocurrency. Growth in the number of funded addresses on the cryptocurrency’s blockchain fell for the first time in August 2022, according to research firm Messari’s State of Bitcoin report. The number of funded addresses grew only by 1.1% in August 2022 as compared to 2.5% in Q2 2022, the report states. The number of active addresses, or addresses that engaged in some form of activity on bitcoin’s network, fell by 4% in the same time period.

Profit Opportunities        

The narrative of bitcoin as a hedge to mainstream equities has taken a beating during this cycle as the cryptocurrency’s price moves in tandem with the stock market. That might turn out to be a blessing for crypto investors and provide them with opportunities to book profits.

Past data shows that the S&P 500 generally has positive returns in October. Despite prevailing economic tidings, corporate balance sheets are in their “best condition going into an economic recession”, says Rick Reider, chief investment officer of global income and head of global allocation at investment firm BlackRock Inc.

For investors, this means there might be earnings surprises that will boost the stock market this earnings season, a gloomy global outlook notwithstanding. Based on recent trends, bitcoin markets will follow the markets.  

The Long Story of Bitcoin Fundamentals

Research firm Messari’s report stated that lower volatility in price resulted in fewer investor liquidations in August. Liquidations by investors who are long bitcoin were at $5 billion. At $3.5 billion, total short liquidations were lower as compared to $6.6 billion in June. This means that turncoat investors, those who entered the markets solely for profits, are drifting out of the crypto ecosystem. The long-term story of bitcoin remains intact for now. “Right now, it is all an experiment as to what’s going to work for crypto,” Edward Moya, analyst at currency firm Oanda, told Coindesk last week. But he said that the cryptocurrency’s long-term value still holds.