Alpha Hunt — October

Just one month into the fourth quarter, and last week we already saw Bitcoin topping its historical high!

BTC’s projected yearly return has also increased to 112.3%, suggesting that “Uptober” will likely be extended to the remainder of this quarter. But will the subsequent Bitcoin-linked ETF launches provide the same bullish boost as the first?

BTC: Up, Up and Away

Led by investor confidence on the back of ProShares’ first Bitcoin futures-backed ETF launch, BTC beat its previous all-time high, above $66,000, in response. In anticipation of this watershed moment, a fury of long positions was built, leading to a huge spike in options premiums by 12%, and open interest reaching an eight-month high of $3.22 billion on the Chicago Mercantile Exchange (CME). These events have fuelled a BTC bull run prior to the actual ETF launch on Oct. 18, 2021.

Whales are also contributing to the positive wave by stocking up on BTC in early October, propelling the price of BTC even higher. However, the whale ratio is falling to 0.39 (at the time of writing), suggesting that the whales are transferring their BTC profits from exchanges to wallets. To that end, the market currently sees BTC retracing back to its support level of $60–62k.

Could the lower Bitcoin exchange whale ratio signify an overheated market? After a sustained crypto rally, the 25 delta risk reversal metric for 30 days dipped into the negative zone on Oct. 22, 2021, coinciding with the short-term retrace. But, fret not! With the 30 and 180 days metric venturing back above zero, the market is taking a long-term positive stance.

Tapering Down for a Slow Dance

With tapering right around the corner, the crypto rally may see an outsize movement in November. This is most noticeable with the sharp increase in ATM IV after November. Whether the crypto rally will continue is very much dependent on the speed of tapering. In 2013, a hasty tapering resulted in a year of taper tantrums: High treasury yields and panic selling in the stock market.

With rising global inflation risk and a lower unemployment rate in the U.S., the Fed is treading carefully for a graceful taper, and will meet again on Nov. 2 and Nov. 3, 2021, to finalize the details (mark your calendar!). Till then, Bitcoin will remain range-bound, as it seeks to retest the current support level.

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