‘Rotten October’ leaves bitcoin at a crucial inflection point, but macro tailwinds argue against a cycle top: analyst

Bitcoin’s red start to November continued on Tuesday, already bruised after what K33 dubbed “Rotten October.” The foremost cryptocurrency dropped 10% over the past week to retest the $100,000 mark — its lowest level since June, and its weakest 30-day performance versus the Nasdaq since July 2024, Head of Research Vetle Lunde noted in a new report.

Lunde attributes the decline to constrained liquidity and fear-driven sentiment following the historic Oct. 10 deleveraging event — the largest crypto-native liquidation ever recorded in dollar terms of at least $20 billion. “Fear-driven market sentiment, combined with heavy selling from long-term holders, has compounded the weakness as buyers hesitate amid perceived elevated risk,” he said.

According to Lunde, bitcoin is now trading at a “crucial inflection point” roughly 25 days after that event, with additional downside following the latest FOMC meeting, where the Federal Reserve’s 25 bps rate cut was overshadowed by policy uncertainty tied to the U.S. government shutdown. Compounding the uncertainty, K33’s derivatives regime indicator, which compares current market structure to past cycles, shows a mix of bottom-like and early-downturn characteristics, he said.

Onchain data also highlights the pressure: more than 319,000 BTC held for 180 to 365 days were reactivated in the past month, suggesting that long-term holders have been realizing profits as prices stabilized above $100,000, the analyst noted. ETF flows, once tightly correlated with BTC returns, have weakened in influence since mid-2024, as internal market dynamics like revived supply and leverage effects became dominant forces, he argued.

Average performance in days after 10% notional OI decline, BTC. Image: K33.

Potential bullish reversal

However, while traders remain cautious and CME futures premiums have narrowed to levels not seen since the March 2023 banking crisis, Lunde says the structure aligns with typical post-liquidation consolidation rather than a new down-cycle. Historically, such phases are “slow, heavy, and frustratingly choppy,” he wrote, cleansing excess leverage before the next leg higher.

“We expect selling pressure from older cohorts to subside and liquidation effects to ease ahead,” Lunde said. “Conditions may be aligning for a potential bullish reversal once selling exhausts and risk appetite returns.”

Even so, the near-term tone remains grim. Bitcoin has underperformed major benchmarks, with Nasdaq, S&P 500, and gold posting respective gains of 4.8%, 2.3%, and 3.7% in October compared to BTC’s 4% drop. CME open interest has fallen to its lowest since April, and sentiment gauges have plunged into “extreme fear.” Several traders expect deeper downside, K33 noted, pointing to fading demand from digital asset treasuries and the muted price response to positive headlines.

Lunde, however, diverges from that view. While conceding that charts “look horrendous,” he maintains a “patiently bullish” stance, having rotated altcoin exposure back into bitcoin after October’s flush.

He argues that macro conditions — expansive monetary policy, potential 401(k) access to crypto, tier-1 bank participation, and a friendlier U.S. regulatory tone — are inconsistent with a four-year-cycle top. For Lunde, the recent correction instead resembles a reset, not a reversal. “Buying the bloodshed is a prudent strategy for long-term patient investors,” he concluded.

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