Crypto News: FOMO Is Back! Crypto Traders Are Panicking

Summary: The signs were all there; we are unsurprised that Bitcoin is up +8.5% this month. Many traders are starting to have FOMO – fear of missing out. October tends to be bullish for BTC; prices broke out of the July-September downtrend on September 29, and the Fed has paused since July, which is historically bullish for BTC. When the Bitcoin ETF approval comes, BTC will likely jump by 10-20% within a few hours.

Analysis

Bitcoin is following precisely the roadmap we presented in our previous ‘Crypto Researcher’ insights.

On September 28, in ‘ October’s Wild Bitcoin Ride – Top Catalysts Revealed,’ we showed how October tends to be bullish, and BTC is up a respectable +8.5% month-to-date. On September 29, our note ‘Bitcoin on the Verge of a Massive Breakout?’ showed that BTC broke above its July to September downtrend and confirmed our October bullishness. On October 3, ‘Buy the Fed’s “Pause” But Sell the Fed’s “First-Rate Cut,” we concluded that the last time the Fed paused (in January 2019), BTC rallied from 4,000 to 13,000 during the next seven months. While we were not calling for a rally of similar magnitude, we expected a sizeable move higher, nevertheless.

During the last few days, Bitcoin prices have been squeezed higher – we are not surprised – and expect this to be an ongoing process. On Tuesday, October 17, we explained in ‘Bitcoin ETF Green Light – Anticipated $16-24 billion Surge!’ that approving a Bitcoin ETF would push BTC prices toward the 33,100 to 37,500 range. This was based on our fiat into crypto inflow models, and we used Tether’s market capitalization (cap) as a proxy for the impact of the potential onramp. In our bullish scenario, where 30% of the Gold ETF market cap would be moved into the Bitcoin ETF, BTC prices would lift to 42,000.

From the macro side, we are even more confident that the Fed will remain on hold for the next two quarters before they might cut. First, the rise in 10-year treasury yields is now doing the tightening for the Fed, and several members of the Federal Reserve decision-making circle have acknowledged this. Second, Fed Chair Powell, speaking at the Economic Club of New York on Thursday, October 19, gave a robust verbal indication that the Fed will pause for the foreseeable future. After his remarks, interest rate derivatives are priced with less than a 30% chance of another hike this year. History has shown that when the Fed has finished its hiking cycle, Bitcoin tends to rally.

BTC will likely retest the 30,000 level within the next few days and then target the year-to-date high at 31,500, achieved on July 13. This date coincides with the landmark legal victory for Ripple Labs Inc. as a U.S. District Judge ruled that Ripple Labs did not violate federal securities law by selling its XRP token on public exchanges. This was seen as a partial win for Ripple – the emphasis here is on ‘partial’, and when the market realized this, it gave back the initial +74% rally in XRP tokens.

Last night, the U.S. Securities and Exchange Commission (SEC) dropped claims against two Ripple Labs executives in its lawsuit alleging Ripple Labs violated U.S. securities law.

This SEC decision will carry the positive momentum and build upon the positive news flow around a potential Bitcoin ETF approval. Expectations were high for the third week of October when the second deadline for several Bitcoin ETF applications was due. The next round will be in January 2024 unless the market is greeted with an early approval.

There is no doubt that BTC is taking advantage of the favorable macro condition and the pause in interest rates, and as the momentum keeps building up for the ETF approval, traders should use any dip to roll up their BTC calls into ever higher strike prices. When the approval comes, BTC will likely jump by 10-20% within a few hours – unless prices are already pushed into those ranges (33,100 to 42,000). Bullish positioned traders could benefit enormously – other traders might sit on the sidelines, tortured by FOMO…

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