Red Uptober: Why Bitcoin Just Had Its Worst October in Years

Despite a roaring start and fresh all-time high early on in October, the expected "Uptober" turned into a real downer for Bitcoin, with the leading cryptocurrency sinking to levels untouched for four months. 

Bitcoin's price recently stood at $109,820 per coin, according to CoinGecko, about 13% below its October 6 record of $126,080. Over a 30-day period, the asset is down by more than 8%.

October is historically one of Bitcoin's strongest months—thus the "Uptober" moniker—with data from CoinGlass showing just one monthly loss over the previous 10 years, back in 2018. This October broke a six-year streak of gains, showing a 3.69% drop from the start of the month to the end.

The plunge during a historically strong month for Bitcoin came amid unsettling macroeconomic conditions, including most recently, concerns about liquidity and the diminishing prospects of a third interest rate cut that investors have been eagerly anticipating. 

On Wednesday, U.S. central bank Chair Jerome Powell said that a reduction was "not a foregone conclusion," sending digital assets into a tailspin that dropped the largest cryptocurrency by market value below $106,000 at one point. 

Earlier in the month, BTC and other risk-on assets had tumbled after U.S. President Donald Trump re-escalated his trade war with China, raising concerns about the global economy. Investors liquidated more than $19 billion in positions, nearly 90% of them long positions expecting price increases. 

"The negative October returns can be attributed to a convergence of three primary factors: a powerful macroeconomic shock, fragile internal market structure, and a subsequent lukewarm monetary policy signal," Bitwise Senior Investment Strategist Juan Leon told Decrypt, adding that October 11's crash had a long-term effect on the market. 

In her Crypto is Macro Now newsletter on Friday, analyst Noelle Acheson wrote that "the reset of rate cut expectations" had continued "to weigh on crypto prices."

"As Chair Powell acknowledged in his statement, liquidity conditions have been tightening," Acheson wrote. "They're not yet near crisis levels as a percentage of bank reserves, but BTC is one of the more sensitive assets to liquidity conditions."

She added: "Equities have earnings and other factors impacting their appeal, and bonds have fiscal and economic growth. BTC doesn't, it's pure sentiment, which in the short-term is affected by monetary liquidity and in the long-term by the supply/demand balance."

Earlier in the week, in a Telegram exchange with Decrypt, she also noted increased selling by long-term holders, possibly tied to the belief that Bitcoin had reached a peak in its latest four-year cycle—the timeframe that has defined crypto market rhythms. 

“If you still believe in the BTC four-year cycle (and many old-timers probably do), then we're at the peak if you map previous cycle patterns," she wrote.

Bitcoin, crypto, and stocks have typically performed well in a low-interest rate environment. The Fed has cut rates at its last two meetings.

Bitcoin climbed nearly 11% last October, and almost 29% in October 2023. Back in 2021, it jumped a whopping 40% that month. On average, the digital coin has given investors average returns of nearly 20%, according to CoinGlass.

"That makes this feel like one of the weakest 'Uptober' performances in years, not the result of a single broad selloff, but largely driven by selling during U.S. hours," pseudonymous CryptoQuant analyst Maartunn told Decrypt. They noted other factors including China tariffs and economic readings, including unemployment data and the consumer price and producer price indexes, which moved in less favorable directions in recent months. 

Still, some analysts are feeling optimistic. Grayscale's Head of Research Zach Pandl told Decrypt that the long list of crypto exchange-traded funds the SEC is expected to approve could help the market, and that the regulatory environment remains favorable for digital assets. 

"With bipartisan market structure legislation back on track and several altcoin exchange-traded products set to launch, we expect that the crypto market setback will be short-lived," he said.

Will it be "Moonvember" for Bitcoin, then? Last year, the 11th month brought a whopping 37% price spike for BTC—something investors would no doubt be thankful to see again.