Bitcoin concluded October with a decline, marking the first such occurrence since 2018 and breaking a seven-year streak of monthly gains. This period, often perceived by traders as a reliable profit-generating season, saw the OG crypto fall by approximately 5% as global markets experienced weakened risk appetite, leveraged positions were liquidated, and overall uncertainty intensified.
The monthly downturn occurred against a backdrop that included both a new all-time high for Bitcoin and the largest liquidation event in cryptocurrency history. Contributing to the market's apprehension were geopolitical developments, such as President Donald Trump's announcement of a 100% tariff on Chinese imports and proposed restrictions on critical software exports vital for advancements in AI, EVs, and Robotics.
Record Liquidation Compresses Crypto Trading
Bitcoin, which had recently surpassed the $126,000 mark, experienced a significant drop to $104,782.88 between October 10th and 11th. Adam McCarthy, senior research analyst at Kaiko, observed that cryptocurrencies began October tracking stocks and gold near their peaks. However, when market uncertainty escalated, there was no mass rotation back into Bitcoin. McCarthy highlighted the continued concentration of the crypto market, noting that even Bitcoin and Ether can experience substantial drawdowns of 10% within short 15-20 minute periods.
This sharp decline led to the erasure of leveraged positions across centralized platforms and trading desks. Both retail and professional traders were compelled to unwind their exposure, resulting in sidelined crypto wallets and thinner order books than usual. Further impacting market sentiment, the Federal Reserve signaled an unwillingness to pursue further rate cuts this year, a decision influenced by the ongoing government shutdown that restricted access to key economic data crucial for traders to gauge monetary policy direction. In the absence of these indicators, traders have adopted a cautious stance, and large buyers have held back from making significant commitments.
Concerns about market stability extended beyond the cryptocurrency sector. Jamie Dimon, CEO of JPMorgan Chase, predicted that U.S. stocks could face a meaningful correction within the next six months to two years. Jake Ostrovskis, head of the over-the-counter desk at Wintermute, commented that market participants remain hesitant as they analyze what has become the largest liquidation event on record. This caution is sustained amidst ongoing speculation regarding potential systemic vulnerabilities that might still be present in the financial system.
Bitcoin Remains Positive for the Year as Broader Markets Stay Elevated
Despite the dip in October, Bitcoin has maintained a positive trajectory for the year, showing gains of over 16% year-to-date. These gains are partly attributed to Bitcoin's resilience and the market's reaction to evolving stances on cryptocurrency, including those influenced by Trump's policies.
In parallel, broader financial markets have also shown strength. The S&P 500 has risen by 16.3% this year, reaching 6,840 points and recovering nearly 2,000 points from its April 7th low experienced during a period of tariff-related panic. When dividends are included, its total return exceeds 17%. Even traditional investment vehicles, such as the 60/40 stock-bond portfolio represented by the Vanguard Balanced Index Fund, have achieved a total return of 13.1% this year, significantly outperforming its long-term average of just over 8%.
Looking at a three-year trailing basis, the S&P 500 has delivered an annualized return of 22.8%. This performance places it within the top 10% of all historical three-year periods dating back to 1945, according to data compiled by CNBC. The S&P 500 has now gone 130 trading days without experiencing a 5% pullback, making this one of the three longest uninterrupted stretches recorded in the past 44 years. Historically, the first 5% pullback in such a strong bull market has not typically signaled the ultimate peak; it has often been followed by further upward movement. The current strong performance coincides with the entry into what is, on average, the most favorable seasonal window of the year for markets.