Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
Bitcoin (BTC) staged an unexpected late September rally, pushing above $112,000 for its weekly close, setting the stage for a tug-of-war between bullish and bearish market forces. Despite the rebound, observers warn of potential corrections to liquidate “late longs,” while upcoming U.S. employment data and ongoing pressure on Federal Reserve Chair Jerome Powell are expected to influence macro sentiment. Meanwhile, gold achieved new all-time highs, sparking discussions about Bitcoin’s lagging performance, and on-chain data indicates short-term holders are panic-selling, contrasting with the steadfast conviction of long-term investors.
Bitcoin’s Price Action and Trader Sentiment
After threatening new September lows below $109,000, Bitcoin orchestrated a last-minute rebound to reclaim $112,000 as a key support level, holding this point into the week’s first Asia trading session. Market participants, however, remain cautious, emphasizing the need for more evidence before confirming a full-fledged bull market.
Crypto investor Ted Pillows noted on X that the pump was largely due to short positions closing, suggesting a daily close above $113,500 is necessary for a strong rally, otherwise BTC could revisit its lows. Popular trader Roman echoed this sentiment, anticipating a “ping pong” price action between current levels and $108,000, calling for bulls to retake $118,000.
With the monthly and quarterly closes imminent, volatility is expected. At $112,000, BTC would register approximately 3% gains for September and 4.4% for Q3, representing average historical performance for both periods. Trader Daan Crypto Trades highlighted Q3 as historically the worst quarter for Bitcoin, with an average increase of only 6%.
Conversely, Daan Crypto Trades suggested that Q4 could be “very exciting” based on past performance, noting Bitcoin’s recent lag behind gold and stocks. He concluded that Bitcoin remains a reliable asset to watch, especially given its historical trends.
Liquidity Dynamics and CME Gaps
Bitcoin’s overnight return above $112,000 led to a significant reshuffling of liquidity on exchange order books, with data showing price cutting through late short positions. Large players subsequently added more ask liquidity around the $113,000 mark.
In the 24 hours leading up to the time of writing, total crypto liquidations reached $350 million, with short positions accounting for $260 million. Market commentators are closely watching liquidity as a “magnet” for price movements, both upwards and downwards.
Trader CrypNuevo expressed an inclination towards recovery, or a liquidity grab at $106,900 before an upward move, countering the prevailing bearish market sentiment. Current data indicates that a dip below $107,000 could trigger the liquidation of approximately $5 billion in long positions.
Trader Killa also pointed to a new weekend “gap” in CME Group’s Bitcoin futures, which often acts as a price magnet. He suggested that with monthly and quarterly closes approaching, long liquidity might be building before a move to take out weekend lows.
Macroeconomic Influences and Fed Policy
This week, U.S. employment data and statements from Federal Reserve officials are central to crypto and risk-asset traders. High-ranking officials are expected to comment on the economic outlook amidst a growing divergence in opinions regarding interest-rate cuts, which traders view as crucial for increasing liquidity in risk assets.
Members of the Federal Open Market Committee (FOMC) are reportedly not unanimous on the timing and pace of potential cuts. Last week, Fed Chair Jerome Powell, facing considerable pressure from President Donald Trump to accelerate policy easing, attempted to balance hawkish and dovish rhetoric.
Powell stated that the balance of risks has shifted, prompting the Fed to move its policy stance closer to neutral after the FOMC agreed to a 0.25% cut in September. President Donald Trump and others continue to advocate for more aggressive action from the Fed, with Trump having previously called for Powell’s resignation and criticizing his policies.
Throughout the week, private and public sector employment data, alongside initial jobless claims, are anticipated to be primary catalysts for market volatility.
Gold’s Ascent and Bitcoin’s Lag
While Bitcoin bulls found some relief, gold stole the spotlight by hitting a new all-time high on Monday, surpassing $3,800 per ounce amidst a weakening U.S. dollar. This continues a trend of gold outperforming Bitcoin this quarter, with market insights resource Reflexivity Research noting a weakening Bitcoin/Gold Ratio, signaling a preference for gold as a hedge.
Despite this, proponents believe Bitcoin’s price strength will eventually follow gold’s, upholding historical trends. Andre Dragosch, European head of research at Bitwise, attributed Bitcoin’s lag to differing macroeconomic sensitivities: gold is more sensitive to monetary policy and the U.S. dollar, while Bitcoin is more reactive to global growth expectations.
Dragosch suggests that gold’s price action already reflects strong monetary easing, whereas Bitcoin’s still reflects weak growth expectations. He predicts that as growth expectations eventually follow monetary policy changes, Bitcoin will experience a “significant rally” mirroring gold’s path.
On-Chain Data: Speculators Versus “Old Hands”
Recent analysis of Bitcoin’s price dip reveals classic market behavior among different investor groups. A notable distinction exists between long-term (LTH) and short-term (STH) holders, with STHs selling their coins at a loss while LTHs maintain conviction and ride out the market turbulence.
On-chain analytics platform CryptoQuant, in a recent blog post, highlighted that the current dip mirrors past setups where short-term capitulation coincided with strong LTH conviction, often preceding a major rebound. These “low-ratio zones” historically align with price bottoms, signaling the late stages of corrections.
The Spent Output Profit Ratio (SOPR) derivative confirms that newer investors reacted to the dip by selling at a loss, while “old hands” held their positions. STH entities, holding for up to six months, are typically more sensitive to sudden Bitcoin price volatility, especially when the market falls below their aggregate cost basis, which is currently around $109,800.
