Growth, volatility and liquidations. What will happen to the price of bitcoin

In 2021, the October rally in bitcoin prices brought the entire cryptocurrency market to all-time highs. October was traditionally considered a growth month for cryptocurrencies, but the market had been in a lull for quite a long time without sharp price spikes. By the end of the month, the rise in the price of the first cryptocurrency revived bored traders, and briefly returned volatility to the market.

On Tuesday, October 25, the bitcoin (BTC) exchange rate rose by 5% for the first time since the beginning of the month, exceeding the $20,000 level. At the same time, amid growing volatility in traditional financial markets for four months, the price of BTC remained in a narrow range of $18,000 to $20,000. Ethereum (ETH) showed an even more rapid rise in price, hitting $1,596 in the moment.

“Bitcoin and Ethereum had been in a horizontal channel for more than a month and could not go beyond its borders in any way. So it was only a matter of time before an impulse appeared when one of the channel's edges was broken. ETH eventually did just that and fulfilled its goal within a day, going up the width of the previous flat channel,” comments Andrey Podolyan, head of Cryptorg trading platform.

The BTC price is still holding near the upper boundary of the channel, the expert notes. Support for the jump in cryptocurrencies, according to Podolyan, was the US stock market, “which found the bottom, at least locally.” During the growth on the Binance exchange “an abnormal BTC spread was held,” which may indicate an unnatural price increase, said the head of Cryptorg, referring to discussions with colleagues on the crypto market.

Growth in the range of 5% per day for cryptocurrencies is more of a commonplace than something out of the ordinary, comments Nikita Zuborev, senior analyst at aggregator Bestchange.ru. “Within the current local trend changes were not significant, and even after this small revival, bitcoin remained in its established range, moreover, somewhere in the middle of the acceptable interval, and not even at its upper limit,” the analyst said.

The nature of this growth is rather technical, a standard rebound after serious bear pressure within the last couple of weeks, Zuborev believes. Further growth, if it happens, will be rather short-term. At the end of the week the futures on the Chicago exchange are expected to expire, which will stabilize the rate near the levels of $19 000-21 000, the expert says.

Volatility and liquidations

Traders undoubtedly miss volatility, Podolyan notes, “In addition to weekends, which are held in complete calm, some weekdays are also tasteless. And volatility is the bread for the active trader.” During the calm in the market, some active speculators get into the territory of high-risk crypto assets, among them the so-called meme coins, whose price can fluctuate by thousands of percent.

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According to analytics platform CoinGlass, the sharp movement in the price of bitcoin and other cryptocurrencies overnight led to the liquidation of margin positions of $1,49 billion, with more than 87% of the liquidated traders taking short positions, meaning they bet against price increases.

In liquidation, the exchange forcibly closes a trader's position due to a partial or complete loss of his initial margin. This occurs as a result of the fact that the traders cannot meet the collateral requirements for the leveraged position, that is, they do not have enough money to keep the trade open.

Liquidation statistics on crypto exchanges

Source: Coinglass.com

More than $753 million of liquidations occurred on bitcoin, over $627 million on Ethereum and $7 to $20 million of liquidated funds were recorded on Cardano (ADA), Ethereum Classic (ETC) and Solana (SOL) coins. The largest percentage of liquidations was recorded on the FTX exchange, where more than 80% of users held short positions.

What will happen to the price

Nothing remarkable is happening, notes Sergey Mendeleev, head of InDeFi Bank. “For three years now, cryptocurrency rates have been a derivative of the US indices, particularly the S&P 500. And the latter, having drawn a double bottom, went up,” the expert comments. As of October 26, the rate of S&P 500 index stands at $3874.

There are no fundamental reasons for the growth of both the U.S. economy and cryptocurrencies, says Mendeleev. “Inflation is raging, rates are rising. But things are even worse in neighboring markets, so what are the options? The other issue is that it's all a big dead cat bounce,” the expert reasoned, referring to the term used to describe a small and short-lived price recovery in the market.

According to the head of InDeFi Bank, even if the S&P 500 gets to $4000, and BTC and ETH go past $30 000 and $2000 respectively, we can't speak about a new rally, at least until the measures of the Federal Reserve System (Fed) lead at least to the end of inflation growth and stop rising consumer prices. “That's a long way off. Don't hold your breath,” warns Mendeleev.

As for the short-term price movement, according to Podolyan, with the continued positive trend in the US stock market and bitcoin's breakdown of the $20 400 level, BTC may eventually reach the $22 400 mark. Otherwise, according to the head of Cryptorg, the price of BTC will remain within the channel ($18 400-20 400).

No technical or fundamental factors indicate a potential reversal of the global trend, Zuborev believes. According to the expert, it is not necessary to consider the current market movements as a stage of change of direction and increase in volatility in the next few weeks. “We still expect the absence of a noticeable movement at least until the middle of next year, even with a possible strengthening of the correction in late 2022 - early 2023,” the analyst summarizes.