Crypto traders are learning the hard way that past performance is not indicative of future gains.
October, often hailed as a historically bullish month for crypto assets, has been marked by volatility following the renewed threat of a US-China trade war.
‘It’s too soon to say that the entire market’s flipped bearish, but Uptober at the very least has been placed on ice.’
— Connor Howe, the founder of Enso.
Bitcoin has dropped more than 12% after registering an all-time high above $126,000 last week, dragging the rest of the market down with it. Although markets experienced a reprise on Monday, that optimism has been short-lived.
“Yesterday’s brief rebound in crypto markets felt like a classic dead cat bounce, fueled more by short-covering and bargain-hunting than any genuine de-escalation in US-China trade tensions,” Connor Howe, the founder of Enso, a layer-1 blockchain network, told DL News.
On Thursday, the Chinese commerce ministry announced that it would apply enhanced restrictions on the export of rare earth metals, key materials used in the manufacturing of everything from military equipment to consumer electronics.
US President Donald Trump quickly threatened a 100% tariff on Chinese imports on Truth Social, pummeling global capital markets, crypto included.
Though Trump walked back his rhetoric, posting on Truth Social that “it will all be fine” on Monday, traders aren’t convinced.
As of Monday, spot Bitcoin exchange-traded funds saw outflows of over $362 million. Investors exited spot Ether ETFs to the tune of $428 million over the same period.
“It feels like 2017’s China FUD all over again, specifically the ‘U’ phase – Uncertainty,” Howe said, referring to the popular market’s acronym for fear, uncertainty, and doubt.
“It’s too soon to say that the entire market’s flipped bearish, but Uptober at the very least has been placed on ice.”
‘Higher volatility’
Continued tariff tensions between the world’s two largest economies remain the key focus among investors.
In less than a month, the 90-day tariff truce between the US and China will conclude. Chinese imports to the US face import taxes of 30%, while US imports into China are held at 10%.
Before that truce, import taxes on Chinese goods were set at 145% while American imports faced a 125% tariff in China. The deadline for a new deal, or another extension, is November 10.
“Tariff news between now and then will likely have a large influence on markets,” Carlos Guzman, an analyst at crypto market maker GSR, told DL News. “I expect higher volatility as they wrestle for leverage.”
Investors and traders are also keeping a close eye on the Federal Reserve.
The American central bank will meet on October 29, and data from the CME Group’s FedWatch tool suggests overwhelming expectations of another interest rate cut at the end of the month.
Still, given the depth of the crypto market’s crash on Friday, the leveraged liquidations of which ranked as the industry’s worst in history, traders are still as tentative as ever.
“Friday’s events are likely to have caused loss of confidence to some degree,” Guzman said. “It may take some time for market participants to regain confidence.”
Crypto market movers
Bitcoin is down 2.3% over the past 24 hours to trade at $111,616.
Ethereum is down 3.1% over the past 24 hours, trading at $3,986.
