Last week, we said $82.5K was the line. If BTC broke it, we would look lower.
Today, BTC broke it for a moment. During the Asian session, the price fell to $82,150 in five minutes. About $35M of long positions were closed by force. Then buyers came in. In the same five minutes, the price was back above $82.5K. As we write, BTC is near $83K.
For two weeks, we have told our readers. We said this was a range, not a breakout. Since late September, BTC has moved between about $82.5K and $87.2K. Short squeeze pushed it to the top. Lack of demand pushed it to the bottom. So far, it has not left the range.
We also said in our chat that if BTC went down, altcoins would go down more. That happened this week.
So what do we think now? We are cautious bullish. The big uptrend is not broken. The range is still there. And in the short term, a lot of people are betting on a drop. Two weeks ago, we also mentioned that some big buyers had left. Right now, there is no strong hand on either side. In a market like this, the price can move fast in both directions. So we trade less, keep some cash ready, and look to add if the price goes lower.
What Changed
Macro. The jobs report was weak. The US added only 29K jobs in September. The forecast was about 90K. July and August were also cut by 60K in total. Unemployment went up to 4.2%. Wages grew 3.0% from a year ago, slower than prices. After the report, the chance of an October rate hike fell close to zero. On Polymarket, it is now about 15%.
But the Fed did not sound softer. On Wednesday, the Fed released the notes from its September meeting. They show the Fed still expects one more hike this year. It did not say if it will be in October or December. We think December is more likely. If growth stays strong and inflation stays high, a third hike in 2027 is possible too.
There is something new this week. Fed officials have started to talk about AI as a cause of inflation. Five of them spoke about it. Most of them think the AI build-out may be pushing prices up right now. Data centers need a lot of building materials, power and other key goods. Many other industries need the same things, so prices go up for everyone. Fed Governor Barr was the most hawkish. He said rates may need to go up by another 50bp or more. In the long run, they see two sides. AI could help the economy grow. It could also mean companies need fewer workers.
The biggest pressure is still long-term rates. After the jobs report, the 10-year yield fell to 5.18%. On Wednesday, it jumped to 5.35% during the day. That is the highest since 2002. The 30-year yield hit 5.72%. Last week, we said 5.32% was the level to watch. Yields went above it this week but did not stay there. The 10-year closed near 5.29%. We still think long-term rates will not calm down soon.
Oil is still high. Brent is around $102. We think about $10 of that comes from risk, not supply and demand. A storm in the Gulf of Mexico pushed it up more this week.
One more thing. In the past, markets got more jumpy before midterm elections and calmer after. But this year, there is a risk that attacks on Iran start again after the vote. So we would not expect a quiet November.
The next big test is the September inflation data (CPI) on October 14.
AI. AI spending is now good news and bad news at the same time. It is what drives company profits. It is also one reason the Fed wants to stay hawkish. Both come from the same place.
The market now treats the biggest AI companies as safe stocks. On Tuesday, the S&P 500 closed at a record high. On Wednesday, when yields jumped, it fell only 0.2%. Small companies fell 1.3%. Inside tech, we still like chips and hardware more than software.
Crypto. This week, the selling came from the US. Early in the week, most of it came from futures trading on Binance and other big exchanges. From Tuesday’s US session, Coinbase became the main seller. BTC on Coinbase was up to $61 cheaper than on Binance. That was the weakest level in this move. ETFs took in $119M on Monday, then lost $277M on Tuesday. On-chain data shows long-term holders sold about 26K BTC on Tuesday. That was the most in one day since late September. This is an early number and may change.
This is why we do not chase the price up. But there is another side. In the last few days, many traders opened shorts near the bottom of the range. In two and a half days, open interest in BTC futures rose by about 17K BTC to 341K BTC. Most of this was new shorts. Today’s quick drop below $82.5K did not make them close. Above the current price, there are about three times more shorts that could be forced to close than longs below. When too many people bet the same way, the price often goes the other way.
Altcoins. We said altcoins would fall more than BTC in a drop. On Tuesday, only 8 of the top 64 altcoins went up. The middle coin fell 4.1%. ETH/BTC fell to 0.0310, close to its 30-day low. ETH ETFs have seen money go out for seven days in a row, about $450M in one week. A few coins bounced, like NEAR and some Solana DeFi coins. But no clear leader yet. BTC is still our main position.
