The recent price action has seen Bitcoin reclaiming the crucial 21-week exponential moving average (EMA), a level closely watched by analysts as a key indicator of bullish momentum. As trader Rekt Capital noted, holding this trend line is vital for sustaining the upward trajectory. However, not everyone is convinced. Trader Roman, for instance, highlights bearish divergences on Bitcoin’s relative strength index (RSI) on higher time frames, raising the possibility of a significant head-and-shoulders reversal pattern forming. This divergence suggests that while the price is rising, the momentum is waning, a classic warning sign for technical analysts. Furthermore, concerns remain regarding low trading volumes, casting doubt on the strength of the rally.
Adding to the uncertainty, HTL-NL points out that Bitcoin is currently trading within an expanding triangle, a pattern that typically precedes a period of heightened volatility and price discovery. This suggests that the market is still undecided on its next major move, and a breakout in either direction is possible. The overall sentiment remains cautious, with traders closely monitoring key support and resistance levels to gauge the true strength of the recovery. Data from CoinGlass reveals significant liquidation levels both above and below the current price, indicating that volatility is likely to persist in the near term.
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The macroeconomic backdrop is playing a crucial role in shaping Bitcoin’s price action. The Federal Reserve’s upcoming interest-rate decision is a key event on the calendar. The market is pricing in a high probability of a 0.25% rate cut, driven by the absence of recent inflation data due to the government shutdown. The thinking here is that easing monetary policy could provide a tailwind for risk assets like Bitcoin. Lower interest rates tend to make alternative investments more attractive, potentially diverting capital away from traditional assets and into the crypto market.
Adding further fuel to the bullish narrative is the ongoing US-China trade negotiations. A potential deal between the two economic superpowers has sent positive signals to the market, alleviating concerns about escalating trade tensions and their potential impact on global growth. News of a near-completed deal has already spurred a rally in stock futures, demonstrating the market’s sensitivity to these developments. The S&P 500 has added a staggering $3 trillion since earlier this month, highlighting the potential for further gains if the trade deal materialises.
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Network economist Timothy Peterson has offered an optimistic outlook, arguing that Bitcoin price cycles are directly influenced by interest-rate policy. Peterson suggests that forthcoming quantitative easing (QE) could provide a significant boost to Bitcoin’s price. His analysis is rooted in Metcalfe’s Law, which posits that the value of a network is proportional to the square of the number of connected users. By this measure, Bitcoin is still undervalued. According to Peterson’s analysis, the continued growth of the Bitcoin network justifies higher prices, and any dips should be viewed as temporary corrections.
An AI simulation cited by Peterson points to a potential target of $125,000 by the end of October, indicating a strong bullish outlook for the near term. While the recent price dip to $102,000 on Binance has slightly tempered the model’s readings, the overall trajectory remains positive. It’s important to remember that such models are not foolproof and rely on historical data and algorithms that may not accurately predict future events. Nevertheless, they provide a valuable perspective on potential price movements.
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Despite these encouraging signs, Bitcoin’s “Uptober” performance remains modest. Currently, BTC/USD is only marginally higher than its October opening level. Historically, October has been a strong month for Bitcoin, with average gains of around 20% since 2013. The market is now pinning its hopes on a strong “Growvember” to deliver the returns that “Uptober” failed to provide. Daan Crypto Trades points out that Bitcoin’s price has remained within a relatively small 8% range for the past four months, suggesting that a bigger move is imminent.
Data from the Crypto Fear & Greed Index indicates that market sentiment is currently in “neutral” territory, reflecting the uncertainty and conflicting signals that are prevalent in the market. However, Bitcoin is on track to achieve its highest monthly close in history. Bitcoin short-term holders (STHs) are also breathing a sigh of relief as they move back into profit. These holders, who have bought within the last six months, are now above their aggregate cost basis, signalling a return of confidence in the market. Data from CryptoQuant confirms that the Short-Term Holder Profit Ratio (SOPR) is back above 1, indicating that STHs are now selling at a profit.
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CryptoQuant research suggests that historically, the overall supply in profit tends to reach 95% before a local correction occurs. Currently, the percentage of supply in profit is around 83.6%, leaving room for further upside before a potential pullback. The willingness of investors to hold onto their Bitcoin while expecting further gains suggests underlying strength in the market. While Bitcoin has bounced back from recent lows, the path ahead remains uncertain.
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The combination of positive macroeconomic developments, promising technical indicators, and renewed investor optimism is creating a cautiously bullish environment for Bitcoin as we enter the final stretch of 2025. However, lingering concerns about technical weaknesses and the potential for volatility mean that traders should proceed with caution. The next few weeks will be critical in determining whether this rebound is the start of a sustained rally or merely a temporary reprieve before further downside.
