While Bitcoin stagnates near the level at which the futures market opened the new week, stock indices continue to expand to new historic highs, mainly thanks to the technology sector. The markets are full of optimism, and with good reason: the US central bank (Fed) is likely to cut its base interest rate by 0.25 percentage points at its upcoming meeting.
Optimism that may be fragile
Current valuations of US stocks are approaching the peak of the dot-com bubble of 1999 and 2022, just before a deep correction. It can therefore be expected that the markets will undergo a correction in the near future, which could also affect Bitcoin. Investors are willing to pay high prices, reflecting optimistic expectations that may not be fulfilled.
Many mistakenly believe that it is enough to follow Donald Trump‘s social media accounts because the markets react to his statements. However, properly functioning markets should not be influenced by such statements. Bitcoin is now entering the last days of October, which has historically been a very successful month with an average monthly return of 20.3% and a median of 14.7%. This year, however, even a small decline could make October the first losing month since 2018.
Key threshold of $112,000
Bitcoin is holding above the local support level of $112,000, which previously acted as resistance. However, trading volumes are weak and sellers remain more active. Nevertheless, the market is at an interesting point – the Fed will end its two-day meeting tonight, which could be an impetus for an upward rebound.
Another wave of monetary policy easing is expected, which could help not only bitcoin, but also gold and stocks. Nevertheless, it is necessary to bear in mind the fait accompli effect, i.e., that what is expected is already factored into prices. While a rate cut may boost markets in the short term, it does not in itself guarantee a new growth trend. This will depend on whether investor confidence can be maintained and risk appetite restored. It is this combination of monetary easing, market psychology, and macro data that will determine whether Bitcoin closes October in the green or slips into the red for the first time in seven years.
