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Key Takeaways
Uptober no more: The first red October for Bitcoin in the last 7 years.
How the US Government shutdown is impacting crypto.
Chart of the week: Bitcoin’s price compared to US institutional overnight lending markets. A visual representation of how interest rate expectations have impacted price.
The markets have once again taken a turn that many weren’t expecting.
Historical and seasonal data pointed one way, yet we’ve just seen the first red October in seven years. More on that soon.
So what’s driving this recent uncertainty? Today we’re going to break down the fundamental forces behind the market and give you a visual look at how conditions have shifted.
Let’s dig in.
Red October
Historic data is just that, the past.
While it’s not a guarantee of what comes next, it does give us insight into why many expected Bitcoin’s returns to be positive in October once again, considering that’s been the case for six consecutive years.
Well, history doesn't always repeat itself.
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And what might stir some concerns for investors is that the last time we saw negative prices in October 2018, we continued to see red for the remainer of Q4.
A starkly different attitude that many analysts hold today, with much of the community predicting Q4 will bring nothing but good tidings and joy. So, what is driving this shift?
Well, the US Government shutdown isn’t helping…
Shutdown
Since the start of October hundreds of thousands of US federal employees have been left in the lurch, in what’s now officially become the longest government shutdown in US history. In case you’re not aware, negotiations between the Democrats and Republicans on a new budget are holding everything up.
And with the shutdown, economic data releases have stopped. This is the sticky bit, as interest rate changes have been a key driver for the market in 2025. Without data, policy makers and market pundits haven’t got much to work with on deciphering the direction of the US economy.
It’s a mess. And the uncertainty is spilling into Bitcoin.
Chart of the week: Bitcoins price compared to US institutional overnight lending markets.
The chart below looks busy, but let me walk you through it. The orange line is Bitcoin’s price, and the black line is the gap between today’s interest rate in the US and the 90-day average interest rate institutions pay in overnight lending markets.
By comparing these variable overnight rates with the official fixed rates, you can get a read on where the market expects interest rates to go next. The dashed horizontal lines show the depth of expected 90-day cuts.
Looking back at the year that was, you can see that the market’s expectations have drifted from 0% (no cuts), all the way to 0.75%. What’s driving this shift?
Quite a bit.
Firstly, you have the demand for cash – but in essence, fundamentals and data are of significant influence. And with the government shutdown and a lack of these figures, we’ve seen a spike in overnight lending rates.
This could be because, without any data to go off, institutions are predicting the Fed will be hesitant to pursue rate cuts.
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Simply put, the market’s expectations have reset, right back to levels we haven’t seen since June and August.
When you look at how Bitcoin’s price has behaved during periods where the black line is steepening (meaning less cuts expected), it’s generally trended lower. And the inverse of that is also true.
So what I’m watching for is a renewed view from the market, that rates are coming back down. And that won’t’ be easy to come without the government shutdown ending.
The next few weeks will be interesting as we wrap up what’s been nothing short of a challenging year for crypto markets.