Bitcoin begins a pivotal week in October with the future of the bull market hanging in the balance.
After surviving its largest-ever liquidation cascade, Bitcoin has staged a strong rebound, reaching a high of $116,000 so far.
Market sentiment remains split on the next move, with some traders even questioning whether the bull run can resume.
A major reset in leverage could provide some relief for bulls, but short positions continue to pose a risk.
Meanwhile, U.S. inflation data has been delayed due to the government shutdown, and all eyes are on Fed Chair Powell’s upcoming remarks.
Investors are also monitoring the crypto “debasement trade,” as gold hits record highs.
Bitcoin Rebounds to $116K
Bitcoin climbed back to $116,000 at the start of the week, reflecting a 5.7% recovery from Friday’s low of $109,700 — the aftermath of the largest liquidity wipe-out in crypto history, according to Cointelegraph Markets Pro and TradingView data.
A single tariff announcement in the ongoing US-China trade war was enough to trigger unprecedented market panic.
The turmoil spilled over beyond stocks, affecting gold as well — which, by Monday, had already surged to a record high of $4,078 per ounce.
Trading newsletter The Kobeissi Letter noted on X: “If you include the after-hours drop in futures, the S&P 500 is up +120 points at the open,” highlighting the market’s rapid rebound.
“This has effectively erased 50% of the decline seen late-last week. Now, we await more guidance from the Trump Admin.”
Crypto bounced back strongly after Friday’s lows, adding over $500 million to its market cap. With some short sellers mistiming the market, co-founder Adam Kobeissi called the rally “game over.”
“This was one of the largest and fastest wealth transfers in crypto history,” he noted.
US President Donald Trump, whose post on Truth Social initially helped trigger the sell-off, also contributed to the recovery.
“Don’t worry about China, it will all be fine!” he wrote on Sunday.
In the wake of recent market turbulence, one Bitcoin chart has captured attention: volatility. Crypto quant analyst Frank A. Fetter — whose X account pays homage to a famous economist — noted that implied volatility has now surged to its highest level since April, during the peak of the tariffs debacle.
“BTC implied volatility just spiked: the market is now pricing in larger potential moves ahead. Finally,” he told his X followers.
Fetter seemed to highlight the underwhelming performance during what many expected to be the peak year of Bitcoin’s latest bull run. Concerns are growing that BTC/USD may not deliver a blow-off top in Q4 as it has historically.
Bitcoin Bull Market Hangs on Key Trendline
Traders now face a critical question: has the worst already passed, or is this just the beginning of a major BTC correction?
For trader Roman, who has long doubted the bull market’s strength, the answer is clear.
“Last week’s flash crash perfectly bounced off our diagonal uptrend support from August 2024 at 40k,” he noted on X, sharing an accompanying chart.
“I’m looking for at least a retest of 108 but as many of you know, HTF has bearish indications. Will check 1D when we get an intra support retest at 107-108.”
Roman warned that a break below the diagonal trendline “would ‘officially’ confirm a new macro downtrend and likely signal the start of a bear market.”
On a more optimistic note, trader Skew pointed out that “large players” were stepping in as Bitcoin reclaimed $115,000.
“Looks pretty solid as long as price doesn’t close below $112K on the daily and next week’s weekly chart,” he said, highlighting $120,000 as the bulls’ key challenge.
Other traders looked to exchange order-book liquidity to pinpoint critical price levels.
“Respect the liquidation hot spots,” trader SuperBro advised his X followers.
“Tradfi may need a chance to retest the lows, and there is liquidity from 108.5 to 113 with concentration near the mid 111’s. The hot spot overhead is from 123-128 with concentration around the $126K ATH.”
Analyst Urges Caution After Crypto Liquidity Flush
Last week’s liquidity cascade triggered a record-setting reset across the crypto market.
On-chain analytics platform Glassnode reports that funding rates on derivatives exchanges have collapsed to bear-market lows.
“Funding rates across the crypto market have plunged to their lowest levels since the depths of the 2022 bear market,” the platform noted to its X followers on Sunday.
“This marks one of the most severe leverage resets in crypto history, a clear sign of how aggressively speculative excess has been flushed from the system.”
Open interest (OI) reflects a similar trend. Between Friday and Sunday, more than $20 billion in assets vanished from exchanges, according to CoinGlass data, before bouncing back from $69 billion to $74 billion.
“We saw the largest open interest wipe-out in history. For BTC alone, over $10 billion in open interest was erased across all major exchanges,” Glassnode co-founder Rafael Schultze-Kraft confirmed on X.
He added that liquidations were “almost certainly larger” due to incomplete reporting by some market sources.
“Our BTC Long/Short Bias chart, which tracks the aggregate net positions of the largest BTC traders on Hyperliquid, showed a steep rise in net shorts starting October 6 — well before Friday’s events,” Schultze-Kraft noted.
“While levels have since recovered, they remain deeply negative. Stay cautious.”
Missing Data Shifts Focus to Fed’s Powell
Two key U.S. inflation indicators may be delayed this week due to the ongoing government shutdown.
The September readings for the Consumer Price Index (CPI), Producer Price Index (PPI), and initial jobless claims were originally scheduled for release on October 16.
With these data points on hold, attention turns to senior Federal Reserve officials, particularly Chair Jerome Powell, who is set to speak on the “Economic Outlook and Monetary Policy” at the NABE Annual Meeting in Philadelphia.
Markets will scrutinize Powell’s remarks for clues on potential interest-rate cuts — a move that risk-asset traders hope will provide a liquidity boost.
Expectations remain nearly unanimous for a 0.25% rate cut at the Fed’s October 29 meeting, according to CME Group’s FedWatch Tool.
Commenting on the situation, trading resource Mosaic Asset Company highlighted “deep divisions” among Fed officials over the timing and scope of future rate cuts.
“The minutes of the most recent rate-setting meeting show that the Federal Reserve is staying on the easing path for now,” it noted in the latest edition of its newsletter, The Market Mosaic.
“Comments from the Fed shows there’s deep divisions at the central bank, and whether the full employment or price stability mandate carries greater importance.”
All Aboard the “Debasement Trade” Train
Amid short-term market turbulence, crypto and other risk assets could be entering a broader uptrend, driven by shifting sentiment toward the U.S. dollar and fiat currencies.
Bitcoin’s current bull market has coincided with the rise of the so-called “debasement trade” — a massive hedge against global currency devaluation.
“Bitcoin started climbing to record highs in 2024, reaching levels as high as $125,000,” noted Mosaic Asset Company.
“Similar to gold leading new highs in precious metals, Bitcoin is leading the way among cryptocurrencies.”
With gold hitting new all-time highs on Monday, Mosaic Asset Company highlighted a potential new challenge for risk-asset bulls in the coming months: inflation.
“Precious metals and popular cryptocurrencies have gained on concerns over currency debasement, driven by rising global money supply and soaring government debt. Another potential consequence could be an inflationary wave in the months ahead,” Mosaic explained.
The firm pointed to the “prices paid” component in the Fed’s recent business surveys, often considered a leading indicator of inflation trends.
“While the rise in prices paid aligns with the start of the trade war, currency debasement may also be an underlying driver of inflation,” it added.
The overall behavior of markets this year could amplify any surprises in the macroeconomic landscape.
The Kobeissi Letter pointed to last week’s sudden US-China trade war reaction as a striking example of this new reality.
“The -$19.5 billion crypto liquidation and -$2.5 trillion equity market crash on October 10th underscore a key point: markets in 2025 have evolved into their most reactionary form in history,” it wrote on X.
“When you couple this with record levels of leverage, a FOMO-inducing market, and heavy participation by algorithmic traders, it becomes violent.”
