Bitcoin (BTC) faces heightened downside risks following a recent breach of a key level, according to on-chain analytics firm Glassnode. Furthermore, other metrics also suggest the market could be headed for a deeper correction, with sentiment showing signs of strain after the FOMC rally.
However, many analysts believe that the upcoming “Uptober” could prove bullish for BTC. The asset may find seasonal tailwinds that could stabilize price action and spark renewed optimism.
Why Bitcoin’s Price May Drop Further
In their latest analysis, Glassnode noted that Bitcoin is showing signs of ‘exhaustion’ after the Fed rate cut last week, which pushed the price to $117,000.
“Bitcoin has transitioned into a corrective phase, echoing a textbook ‘buy the rumour, sell the news’ pattern,” Glassnode wrote.
Furthermore, underlying metrics indicate growing vulnerability. Glassnode highlighted that long-term holders (LTHs) have realized massive profits, amounting to approximately 3.4 million BTC in gains, the highest in any previous cycle.
This pattern of significant distribution by long-term holders has historically coincided with market tops.
“Unlike the single prolonged waves of earlier cycles, this cycle has seen three distinct multi-month surges. The Realized Profit/Loss Ratio shows that each time profit-taking exceeded 90% of coins moved, marking cyclical peaks. Having just stepped away from the third such extreme, probabilities favour a cooling phase ahead,” the analysts stated.
A slowdown in fresh demand exacerbates this pressure. ETF netflows, which previously hovered around 2,600 BTC per day, have collapsed to near zero, just as LTH selling has picked up.
“ETF inflows have so far balanced LTH selling, but with little margin for error. Around the FOMC, LTH distribution surged to 122k BTC/month, while ETF netflows (7D-SMA) collapsed from 2.6k BTC/day to nearly zero. The combination of rising sell pressure and fading institutional demand created a fragile backdrop, setting the stage for weakness,” the analysis read.
Moreover, spot markets are showing signs of stress, with trading volumes spiking during the post-FOMC sell-off. Futures markets are undergoing sharp deleveraging, with open interest dropping by billions of dollars. Options markets have also turned defensive, as put demand surges and skew rises sharply, highlighting traders’ caution.
During this tumult, Glassnode points out that maintaining the short-term holder cost basis at $111,800 is crucial.
“With spot and futures under stress, the short-term holder cost basis at $111k is the key level to hold or risk deeper cooling,” the firm stressed.
Given that Bitcoin has already dipped below this cost basis, the likelihood of further declines has escalated. Analyst Quinten Francois suggested that while the short-term outlook is not particularly optimistic, the market may trend sideways rather than leading to an immediate bearish breakdown.
“BTC fell under the $111.8k support and the uptrend support. Made its daily close under these important levels. I think we’re in a no-trade zone and see which direction we go. Might go sideways and liquidity flowing to alts, since the BTC.D is still very bearish,” Francois remarked.
Can Uptober Save Bitcoin? Historical Data Suggests Strong Gains
Despite these bearish indicators, a seasonal phenomenon known as “Uptober” may offer a counter-narrative. Historically, October has been one of Bitcoin’s strongest months, with data from Coinglass indicating an average monthly return of 21.89%.
Analyst Darkfost observed that over the past 16 years, Bitcoin has closed October in the red only four times.
“If you had invested in BTC on October 1st, you would have ended up in profit 12 times since 2009, with a maximum monthly return of 213% in 2010. Looking more recently since 2020, a simple October 1st investment in BTC would have yielded between 7.5% and 30.5% within the month alone. After this, it’s hard to argue that BTC has no seasonality at all, although it could also be part of a broader seasonal effect across financial markets,” he posted.
This historical performance has ignited optimism within the market, hoping for a potential rally in the upcoming month.
As Bitcoin trades below key support levels, the coming weeks will largely determine whether the asset will fulfill its Uptober promises or if the correction will persist.