Bitcoin is expected to bottom in October. Here’s why

Welcome back to Distributed Ledger. This is Frances Yue, reporter at MarketWatch.

Bitcoin has recently seen a “death cross”, which many chart watchers consider as a sign for an asset’s price to head lower. Meanwhile, analysts at QCP Capital said there could be an “imminent final decline” for bitcoin to close the third quarter before bottoming out in October.

Find me on Twitter at @FrancesYue_ to share any thoughts on crypto or this newsletter.

Bitcoin death cross

Bitcoin saw a death cross on Tuesday, with its 50-day moving average trading below its 200-day moving average. It was bitcoin’s first death cross since January, 2022.

A death cross occurs when the near-term moving average of an asset price drops below its long-term average. Many technical analysts consider it as a sign for further downside facing an asset.

From historical data, bitcoin fell 2.3% on average in the week after a death cross, according to Dow Jones market data. In the six months after bitcoin’s last death cross in 2022, the crypto fell 51.7%.

—– Ken Jimenez contributed

A bottom is coming?

Bitcoin could reach a cyclical bottom though in mid- to late- October, based on chart analysis and several upcoming crypto and macroeconomic events, according to analysts at QCP Capital.

The Federal Reserve policy meeting next week could be more hawkish than investors expected, after data showed that U.S. consumer prices rose 0.6% in August, the biggest increase in 14 months, according to QCP analysts.

Still, Fed future traders are pricing in a 97% chance that the U.S. central bank will keep its key interest rate unchanged in its upcoming meeting.

Meanwhile, bankrupt crypto exchanges FTX and Mt. Gox are expected to sell some of their crypto holdings to repay creditors, which could weigh on digital assets’ prices, analysts at QCP noted.

FTX sale

Bankrupt crypto exchange FTX got a judge’s approval on Wednesday to sell its crypto holdings, which it said are worth over $3.4 billion, to pay back its creditors.

A major part of the holdings are held in Solana
SOLUSD,
-0.26%
and bitcoin, according to an earlier court filing.

While some investors are worried that the upcoming asset sale could put pressure on crypto prices, FTX will cap its sale at $100 million worth of tokens per week. The limit could be pushed up to $200 million on an individual token basis, according to the exchange’s plan.

That amount is relatively small compared to the trading volume of the whole crypto market, noted Greg Moritz, co-Founder and chief operating officer at Alt Tab Capital. Bitcoin’s daily trading volume usually ranges between $10 billion and $20 billion, noted Moritz.

“Overall, the actual impact of the potential FTX liquidation on the crypto market is likely to be quite small and take place over months,” according to Moritz.

“However, we already have downward pressure on many coins as a result of the proposal. This is primarily due to the retail crypto market not fully understanding FTX’s proposal and reacting based on fear rather than logic,” he added.

Crypto in a snap

Bitcoin
BTCUSD,
-0.16%
gained 1.8% in the past seven days and was trading at around $26,619 on Thursday, according to CoinDesk data. Ether
ETHUSD,
-0.09%
dipped 0.9% during the same period to around $1,630.