Bitcoin’s Pivotal Week: Will It Reach $120K or End the Bull Market?

The cryptocurrency world holds its breath as Bitcoin (BTC) enters a crucial week. Will the rebound push it to $120,000, or will it signal the end of the long-awaited bull market? This week presents a significant test for investors, with market sentiment hanging in the balance after recent volatility.

Bitcoin Rebounds: A Glimmer of Hope

Bitcoin staged a notable recovery to $116,000 this week. This follows its largest-ever liquidation cascade. The rebound, approximately 5.7% from Friday’s lows of $109,700, offers some relief. However, traders remain divided on the market’s future direction. Some even question the return of the bull market itself.

Weekly close volatility came in right on cue, marking a significant event. A single tariff announcement, part of the US-China trade war, initially triggered widespread panic. Even traditional assets like stocks and gold felt the impact. Yet, by Monday, gold hit new all-time highs of $4,078 per ounce. The wider crypto market also added over half a billion dollars to its market cap after Friday’s lows. Co-founder Adam Kobeissi described this comeback as “game over” for short traders. He called it “one of the largest and fastest wealth transfers in crypto history.” US President Donald Trump’s message on Truth Social further aided the recovery, stating, “Don’t worry about China, it will all be fine!”

Volatility and Market Sentiment

Recent events highlight extreme volatility in the Bitcoin market. Implied volatility is now at its highest levels since April, according to crypto quant analyst Frank A. Fetter. This indicates the market expects larger potential moves ahead. Many concerns exist about BTC/USD failing to achieve a blow-off top in Q4, which is typical for the climax year of Bitcoin’s bull market.

Traders face a dilemma: Is the worst behind us, or is this the beginning of a major price correction? Trader Roman suggests the latter. He notes that last week’s flash crash bounced off the diagonal uptrend support from August 2024 at $40K. Roman anticipates a retest of $108, warning that a break below this trend line would confirm a new macro downtrend and a bear market. Conversely, trader Skew observed large players entering as BTC price reclaimed $115,000. He suggested that as long as the price does not close below $112K on daily and weekly charts, the outlook remains positive. The key challenge for bulls sits around $120,000. Other analysts point to liquidation hot spots. Trader SuperBro highlighted liquidity from $108.5K to $113K and an overhead hot spot from $123K to $128K, concentrated near the $126K all-time high.

Crypto Market Reset: A Leverage Flush

The recent liquidity cascade delivered a record-setting crypto market reset. Glassnode data shows funding rates across derivatives exchanges plummeted to bear-market lows. This marks one of the most severe leverage resets in crypto history. It signals an aggressive flush of speculative excess from the system. Open interest (OI) tells a similar story. Between Friday and Sunday, over $20 billion in assets vanished from exchanges, according to CoinGlass. It then rebounded from $69 billion to $74 billion. Glassnode co-founder Rafael Schultze-Kraft confirmed over $10 billion in Bitcoin open interest was erased. He added that actual liquidations were likely larger due to incomplete reporting. Schultze-Kraft advises caution, noting that their BTC Long/Short Bias chart showed a steep rise in net shorts before Friday’s events. Levels have recovered but remain deeply negative.

Economic Factors: Delayed Inflation Data and Fed’s Powell

Two crucial US inflation data gauges may face delays this week. The ongoing government shutdown affects the release of September’s Consumer Price Index (CPI) and Producer Price Index (PPI), originally due October 16. This shift refocuses attention on Federal Reserve officials, especially Chair Jerome Powell. He will speak on “Economic Outlook and Monetary Policy” at the NABE Annual Meeting. Markets will scrutinize Powell’s language for hints about future interest-rate cuts. Risk-asset traders eagerly await these cuts as a potential liquidity tailwind. Expectations remain strong for a 0.25% rate cut at the Fed’s October 29 meeting, according to CME Group’s FedWatch Tool. Mosaic Asset Company notes deep divisions among officials regarding the timing and extent of future cuts. The minutes from the most recent rate-setting meeting confirm the Federal Reserve is on an easing path. However, internal disagreements persist on balancing full employment and price stability mandates. Labor-market weakness remains a key priority for the Fed.

The “Debasement Trade” and Future Inflation Concerns

Amid short-term chaos, crypto and risk assets may begin a larger uptrend. This is driven by changing perceptions of the US dollar and other fiat currencies. Bitcoin’s latest bull market aligns with the rise of the so-called “debasement trade.” This represents a massive hedge against global currency devaluation. Mosaic Asset Company noted Bitcoin’s movement to record highs in 2024, reaching as high as $125,000. Similar to gold leading precious metals, Bitcoin leads among cryptocurrencies. With gold hitting new all-time highs, Mosaic highlights a potential challenge for risk-asset bulls: inflation. “Precious metals and popular cryptocurrencies have seen a boost over currency debasement concerns,” Mosaic wrote. This follows increasing global money supply and surging government debt levels. An inflationary wave could emerge in the months ahead. Mosaic referenced the “prices paid” component in recent Fed business surveys, often a leading indicator for inflation trends. While the increase in prices paid indicators aligns with the start of the trade war, currency debasement could be an underlying driver of inflation as well. The Kobeissi Letter highlighted the reactionary nature of markets in 2025. The -$19.5 billion crypto liquidation and -$2.5 trillion equity market crash on October 10th serve as prime examples. This, coupled with record leverage and algorithmic trading, creates violent market movements. Investors must conduct their own research and exercise caution.