'Definition of a leverage driven pump' — 5 Things to know in Bitcoin this week

Bitcoin ( BTC ) bounces into a new week, attempting to set new October highs, but worries about market sustainability are everywhere.

• BTC price action challenged $64,000 after the weekly close, but high leverage levels make observers suspicious.
• A slew of macro data prints is due to facilitate a week fraught with potential volatility.
• Onchain data suggests that Bitcoin’s long-term holders are reducing risk this month.
• Short-term holders are meanwhile under the microscope as leverage and open interest both rise precipitously.
• Is Uptober canceled? Some perspectives maintain that BTC/USD will return in time for the monthly close.

Leverage woes taint BTC price rebound

Bitcoin gained momentum into the weekly close, going on to hit highs of $63,975 on Bitstamp, per data from Cointelegraph Markets Pro and TradingView .

BTC/USD 1-hour chart. Source: TradingView

While encouraging on paper, BTC price action nonetheless garnered more suspicion than support among traders as a result.

The reason, they agreed, was leverage — increasing market bets were producing an inorganic price rally apt to disappear in an instant.

Analyst J. A. Maartunn, a contributor to onchain analytics platform CryptoQuant, described recent performance as “the definition of a leverage driven pump.”

Source: Maartunn

Analyzing market structure, popular trader CrypNuevo flagged $63,800 as a potential short-term reversal point.

“I think I see this probability because there could be a few possible catalysts here such as bad economic data or war escalation news,” he explained in a dedicated thread on X on Oct. 6.

CrypNuevo warned that the coming week would be troublesome to trade thanks to many potential volatility curveballs.

BTC/USD 4-hour chart with 21-week, 200-day SMA. Source: TradingView

Despite this, Keith Alan, cofounder of trading resource Material Indicators, considered reclaiming the 21-week simple moving average (SMA) at $62,800 a good sign already.

“A successful campaign puts BTC in a good position to go after the 200-Day MA and the 2021 Mid-Cycle Top,” he told X followers. 

“A failed campaign will indicate more time in the range with greater potential for retesting support.”

The 200-day SMA currently stands at $63,566.

CPI week sees markets abandon 0.5% rate cut bets

A bumper week of US macroeconomic data includes the September print of the Consumer Price Index (CPI) and Producer Price Index (PPI), along with jobless claims.

After last week’s surprise employment surge , analysis expects markets to treat CPI with particular interest, with a month to go until the Federal Reserve’s next decision on interest rate changes.

Data from CME Group’s FedWatch Tool currently sees the Fed cutting rates by 0.25% on Nov. 7 — a sharp contrast to market bets from just a week ago.

Until the employment print, a larger 0.5% cut was a clear possibility, this outcome now wholly missing from market expectations.

“A November 50 basis point rate cut was almost entirely priced-out last week, but that could change,” trading resource The Kobeissi Letter wrote in part of its recent X coverage.

Fed target rate probabilities (screenshot). Source: CME Group

Analyzing US financial conditions, Kobeissi continued that by one metric, two years of rate hikes had already been mitigated.

“Financial conditions posted their largest year-over-year decline in 3 years and are back down to pre-interest rate hike levels. Since October 2023, the Financial Conditions Index has loosened at its fastest pace since March 2020, when the Fed cut rates to near zero,” it revealed . 

“Effectively, restrictive Fed policy and interest rate hikes since March 2022 have been undone. This comes as markets price-in another 75+ basis points of rate cuts in 2024 alone.”

As a result, analysis suggested that the Fed may even be “moving too quickly” with policy unwinding.

The minutes of its September meeting, which brought in the first 50-basis-point rate cut , are due for release on Oct. 9.

Long-term holders “likely” protecting profits

Bitcoin’s “diamond hands” show signs of strain this month, as viewed by the net position change in their realized cap.

This sums the value of all coins owned by so-called “long-term holders” — entities hodling a given amount of BTC for at least 155 days. According to research from onchain analytics platform CryptoQuant, last week, the realized cap dropped by $6 billion .

“There has been a recent sharp decrease of $6 billion (from $19 billion to $12 billion) in the LTH realized cap (blue), suggesting that long-term holders are likely taking profits or closing buying positions,” contributor Amr Taha noted in one of CryptoQuant’s Quicktake blog posts .

Bitcoin LTH, STH net position realized cap (screenshot). Source: CryptoQuant

At the same time, the equivalent metric covering coins owned by Bitcoin speculators, also known as short-term holders (STHs), increased by the same amount. This, Taha argued, suggested that these entities are “likely taking on more risk or increasing their buying positions.”

Meanwhile, active Bitcoin whales currently own more BTC than ever before.

CryptoQuant data covering whale wallets last active within the past 24 hours calculates that their combined balance now totals nearly 267,000 BTC — up 75,000 BTC since the start of September.

Bitcoin active whale address balance. Source: CryptoQuant

Spotlight on speculator profits

STHs are now in focus for another reason — their profit margin is becoming an early warning sign for levels of crypto market leverage.

In another Quicktake post on Oct. 5, contributor Percival noted that when leverage encounters an “impulse zone” — a period where open interest (OI) increases rapidly across exchanges — STH transaction profitability rebounds. This is measured with the STH spent output profit ratio (SOPR) metric.

“‘Impulse zones’ are necessary so that the investor can capitalize on maximum profits with long positions and minimize losses. See Open Interest oscillate between -10% and -8%. On September 24th, there was a drop of -8%,” Percival explained. 

“Compared to past movements, the ‘impulse zones’ happens when the STH SOPR begins the recovery process to see the average profit of these cohorts increase.”

Bitcoin futures OI % change oscillator (screenshot). Source: CryptoQuant

With leverage already on market observers’ radar, Percival added that when OI percentage change levels exceed one standard deviation, market corrections “tend to start.” 

Bitcoin can still produce Uptober comeback

The overnight BTC price push toward $64,000 has at least turned October’s monthly candle green again.

Related: Bitcoin analysis sees BTC price gains on Coinbase premium golden cross

While still treading water, BTC/USD is nonetheless managing to attract some optimistic comments from the trading and analytics community.

Among them is popular trader Jelle, who is eyeing a market transformation in time for the monthly close, delivering a classic “Uptober” in the process.

“Bitcoin is still following the same playbook as last year,” he argued in part of one of his latest X posts . 

“Months of chop, coming to an end in October. Low for the month would be in, and the real fun about to start.”

BTC/USD comparison. Source: Jelle/X

Jelle referenced the seven-month consolidation period that Bitcoin began after hitting its latest all-time high in March. As  Cointelegraph reported , the price has been attempting to break a cycle of lower highs and lower lows since then.

Source: Rekt Capital

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.