Flagship cryptocurrency asset, Bitcoin, seems to be defying all known laws of gravity as it rallies back above the $20,00 trading zone, effectively turning resistance to support. This has gotten cryptocurrency enthusiasts excited about the month of October, usually termed, “Uptober,” because the asset and the market have historically performed positively during the month. 

The current rally is bringing Bitcoin’s price above a long-term descending trendline that stretches all the way back to April 22 or last November, depending on one’s style of technical analysis. In reality, BTC price simply “consolidated” its way through the trendline by trading in a sideways manner where the price has been range bound between $18,500 and $24,500 for the past 114 days. 

This newfound rally has some traders feeling a bit celebratory now that the price trades outside of the descending trendline. However, it is important to note that the rally comes with little to no relevant metrics or macro factors changing, which is not enough to support a bullish point of view for Bitcoin price at the moment. 

Macro analysis 

• Yesterday, the Organization of Petroleum Exporting Countries and its allies, a cartel popularly known as the OPEC+,  announced OKX traders’ margin lending ratio, as a measure, has remained relatively stable, near 12. At the same time, the Bitcoin price jumped 5% since the 3rd of October 2022. Furthermore, the metric remains bullish by favoring stablecoin borrowing by a wide margin. As a result, pro traders have been holding bullish positions. 
• To understand whether Bitcoin can sustain the $20,000 support, the 25% delta skew is a telling sign whenever arbitrage desks and market makers are overcharging for upside or downside protection. The indicator compares similar call (buy) and put (sell) options and will turn positive when fear is prevalent because the protective put options premium is higher than risk call options. The skew indicator will move above 12% if traders fear a Bitcoin price crash. On the other hand, generalized excitement reflects a negative 12% skew.
• the 25% delta skew had been above 12% since September 21st, 2022. It did nosedive below that threshold on October 3rd, 2022, suggesting options traders are pricing a similar risk of unexpected pumps or dumps. Whenever this metric stands above 12%, it signals that traders are fearful and reflects a lack of interest in offering downside protection.
• plans to cut oil production by 2 million barrels per day, which is roughly equivalent to 2% of the global oil demand.  
• Oil stocks rallied at the announcement, but the White House is likely concerned that the reductions will complicate the Federal Reserve’s fight against inflation and possibly contribute to higher petrol prices. This action by the cartel also increases the likelihood of even steeper interest rate hikes, as the U.S. Fed is expected to do what it takes to ensure inflation is put under control. Steeper interest rate hikes will negatively affect all markets, including the cryptocurrency market.  
• While the decision by the cartel could spell an increase in interest rates, another case could be made that the recent job statistics could actually reduce the aggressive interest rate hike approach by the federal reserve. The United States job openings dropped by 1.1 million in August, according to the U.S. Labor Department. The decline was the largest since April 2020 and signaled the U.S. Federal Reserve’s aggressive contractive monetary policy could end sooner than expected. 

Technical Analysis 

• Bitcoin’s move above $20,000 liquidated $75 million worth of leverage short (bear) positions and it led some traders to predict a potential rally to $28,000. Moustache, a technical analysis trader, explained that the descending channel continues to exert its pressure, but there could be enough strength to test the upper channel trendline at $21,500.
• Monitoring margin and options markets provide excellent insight into how professional traders are positioned. Margin trading allows investors to borrow cryptocurrency to leverage their trading position. For example, one can increase exposure by borrowing stablecoins to buy an additional Bitcoin position. On the other hand, Bitcoin borrowers can only short the cryptocurrency as they bet on its price declining. However, unlike futures contracts, the balance between margin longs and shorts isn’t always matched.

• Despite the neutral Bitcoin options indicator, the OKX margin lending rate is currently below 12% and it shows whales and market makers maintaining their bullish bets after the 5% BTC price increase on October 4th, 2022. 

What you should know 

• Generally, institutional investors like Citi and Goldman Sachs expect volatility in equities markets to continue, and both have revised down their end-of-year targets for the S&P 500, while investors are still predicting a down year in 2023. 
• All said inflation remains high across the globe, corporate earnings expectations are being adjusted to the downside, and the Fed appears confidently resolute in its current plans for reducing inflation.