October has historically been the month when the cryptocurrency market has seen the biggest gains, so investors could be forgiven for using terms like “uptober” when using bitcoin. reached a record on October 6.
However, what has happened since then was arguably the most destructive month on record, even though BTC is trading slightly higher today than it was on October 1.
Bitcoin’s October 6 victory laps above $126,000 came to an abrupt halt just three days later, with a cascade of liquidations halting any upside and sending the price tumbling to $107,000. A dead cat bounce was also sold for $116,000, and the price subsequently fell to $102,000 (although the price subsequently bounced back to the current $115,300).
This fierce volatility, which many traders had been craving for months, destroyed positions on both sides of the books. On October 9, more than $19 billion in derivatives positions were eliminated because exchanges went down due to rapid price changes.
Volatility is key, isn’t it?
Traders can’t make money in a boring market, but they can’t lose it either. This rang painfully true in early October, when a brief burst of volatility wiped out $500 billion of the entire crypto market capitalization.
Perhaps the volatility caught traders by surprise after bitcoin had been limited to a range between $107,000 and $126,000 since July, but some of the blame also falls on exchanges.
Binance offered $300 million in compensation to those who suffered losses during the removal. This was fueled by murmurs of discontent after the exchange allegedly automated traders’ liquidated positions, despite having sufficient margin in their portfolio.
To put the decline in context: the price of BTC fell 17.2% between October 7 and 10, while open interest fell more than 30%. The last leverage-inspired crash on this scale was when FTX crashed in November 2022, causing the price to drop 26% and open interest 40%.
In some ways, the market showed resistance to a sell-off that mirrored the fall in FTX. This can be attributed to the institutionalization of cryptocurrency trading, with much of the trading volume taking place on regulated exchanges such as CME, or spot trading through the numerous bitcoin ETFs.
Traumatized merchants
While the market remains resolute, retail traders who bore the brunt of the sell-off remain traumatized. This can be seen as the BTC price and open interest increased in unison after the sell-off, suggesting that very few new derivatives contracts have been opened and that the increase is more due to asset appreciation.
While there have been several wild drops over Bitcoin’s 15-year history, this one felt different; In 2022, 2020 and 2018 there were winners and losers, those who shorted those markets made significant profits, while this time it didn’t matter which side of the market the traders were on, they all got “rekt”.
The BTC monthly candle reveals an eye-opening story, slimy wicks on both sides, and a very thin candle body. This means that if you bought BTC on October 1st and held it, you would make a slight profit. It also means that if you tried to trade directionally over the last three weeks, you will most likely walk away from the market with your tail between your legs.
