Bitcoin Market Analysis: Macro Factors and Cycle Dynamics

Bitcoin Market Analysis: Macro Factors and Cycle Dynamics

After some funds left the Bitcoin market in September following interest rate cuts, the market experienced a new rally driven by fresh capital accumulation, leading to an all-time high of $126,296.00 on October 6th. However, the escalating US-China trade war on October 10th triggered a sharp price decline, dropping by over 18% within a few days to reach $103,516.75.

Following the truce reached during the APEC summit and the Federal Reserve's interest rate cut on October 29th, coupled with positive Q3 financial reports, US stocks surged to new monthly highs. Yet, Bitcoin failed to rebound, struggling near the 200-day moving average (around $110,000). By month's end, it had surrendered all gains made since July.

Factors Influencing Bitcoin's Price

• Improved Macro Liquidity
• US-China Trade War
• Cyclical Sell-offs
• Loss of Key Funds in the New Cycle

With renewed doubts about interest rate cuts and risk appetite not fully recovered, cyclical sell-offs have become the dominant force in determining Bitcoin's price direction. Unless there is additional economic and employment data supporting a risk appetite shift and capital inflows resume, and persistent sell-offs occur, an effective breach of the bull-bear market dividing line could lead to a disastrous cascade and significantly increase the chance of the Bitcoin cycle ending.

US-China Trade War

Following the "sell-the-fact" interest rate cuts, Bitcoin experienced a new rally in early October. On October 10th, the US announced a 100% increase in tariffs on some imports from China, and threatened to impose export controls on key software. This weakened global risky assets and triggered a rapid decline in the crypto market.

From October 24th to 25th, delegations from both sides met in Malaysia for talks. On October 30th, leaders of both countries held face-to-face talks in South Korea, where the APEC summit was held. Outcomes included a reduction of the average US tariffs on China from approximately 57% to about 47%, China suspending a new round of rare earth restrictions for one year, resuming agricultural product purchases, and promoting fentanyl enforcement cooperation. However, deep-seated issues such as structural competition and confrontation have not yet been resolved. US stocks rebounded, but Bitcoin and the crypto market remain trading at low levels due to internal structural damage caused by the rapid decline.

Interest Rate Cuts

Tariff hikes increase uncertainty about inflation and growth, leading the market to favor in the short-term a combination of "strong dollar + resilient real interest rates", reducing risk appetite for high-beta assets (such as cryptocurrencies). This is the transmission path of the US-China trade war's impact on the crypto market. Since September 18th, the dollar index has steadily risen from its low of 96.214 to 99.720 by month's end, and has not retreated due to the temporary truce in the trade war. The suppression of risky assets caused by the dollar index has driven funds out of high-beta assets, and gold has continued to climb. Due to the AI narrative and strong earnings growth, the upward momentum of US stocks, especially tech stocks, has not been damaged. However, Bitcoin and the crypto market, which lack fundamental support and rely only on consensus, emotional impulse and capital inflows, have experienced a continuous outflow of funds, resulting in a 3.83% monthly decline in Bitcoin, significantly underperforming the Nasdaq's 4.7% monthly increase. Although the leaders of both countries reached an agreement, and a short-term truce (within one year) is relatively certain, we must still be wary of events such as "secondary tax increases/secondary embargoes".

Federal Reserve Chairman Jerome Powell signaled a clear dovish shift on August 23rd at the Jackson Hole Global Banking Symposium. The Federal Reserve successfully completed two 50 basis point interest rate cuts in September and October, temporarily alleviating concerns about the US labor market and financial pressure on financial markets. However, the Federal Open Market Committee meeting on October 29th showed clear signs of discord - two members voted against the interest rate cut decision. Powell emphasized in his subsequent speech that an interest rate cut in December is "far from a foregone conclusion" and that the Federal Reserve will take a "balanced approach" between the downside risks of jobs and persistent inflation. Later on October 30th, several Federal Reserve officials issued hawkish statements. According to FedWatch, the probability of an interest rate cut in December fell by more than 30% in two days. Since the correction was sufficient, the Bitcoin price did not continue to decline in the last two days of the month, but Bitcoin Spot ETFs recorded outflows on both days, indicating that the market is still pricing down the probability of an interest rate cut. If support from economic and employment data cannot be obtained, the probability of continued interest rate cuts in December will continue to deteriorate in the medium term, and if there is no support for other positive factors, Bitcoin may get real support near the 200-day line. If it falls back into the "Trump Bottom" range (90000 ~ 110000), the market under the pressure of the "Cycle Law" may experience a "widespread sell-off" tragedy.

The US government is still in a shutdown state, and it is difficult to release official economic and employment data in a timely manner. Short-term traders may be happier to sell crypto assets that lack inherent growth support.

Internal Structure

In EMC Labs' "Bitcoin Cycle Multi-Factor Judgment Model," long-term holder behavior plays a decisive role in shaping the cycle. This group sells chips in cyclical rallies and collects chips in cyclical declines, serving as both a "stabilizer" of the market and a "shaper of peaks." According to eMerge Engine data, long-term holder sales in October reached 84,806 units, the highest monthly figure for the year. Combined long and short-term holder sales totaled 735,930 units, also the highest figure for the year.

This includes selling in the rally during Bitcoin's rise to a record high, as well as indiscriminate selling during the decline. This behavior of continuous and large-scale selling regardless of rise or fall is consistent with the characteristics of long-term holder behavior when prices reach the top in previous cycles. According to the law of the cycle, Bitcoin prices reach the top about 1050 to 1070 days after the low point in the cycle. From November 21, 2022 to October 6 (the day Bitcoin hit its highest price to date), exactly 1050 days had passed. This must be the root cause of why the long-term holder group continues to accelerate its sales. In the future market, long-term holders are likely to continue selling if prices rebound; if the price rebound is weak or even declines, long-term holders will continue to sell, then Bitcoin is likely to complete the construction of the top of this cycle.

Fund Movements

Maintaining any upward pattern requires continuous support for fund inflows. Not only that, but most of the time, the price increase is the second derivative of fund inflows, meaning that not only is there a fund inflow but also the fund must accelerate the inflow to push prices higher. Over the past four months, the trend has continued to deteriorate.

From March to June, with the easing of the conflict in the US-China trade war, accelerated fund inflows led to Bitcoin hitting a new monthly record, and from July to October, the slowdown in fund inflows across all channels continued, and by October, the inflow volume had shrunk to 9 billion US dollars. The continuously slowing fund inflows were difficult to offset the selling pressure of long-term holders, the price attempt to rise failed, and it eventually returned to the upper edge of the "Trump Bottom".

In the "September Report," we analyzed that the pulse-like fund inflows generated by "macro liquidity" and "consensus diffusion" are the main driving force for the rise in Bitcoin prices in this bull market. This is very clearly reflected in the chart of statistics achieved by on-chain prices. The first round of large-scale fund inflows came from the approval of the Bitcoin ETF, and the second round of large-scale fund inflows came from the election of "crypto-friendly president" Trump.

The period from March to July 2025 formed the third largest realization of value in this bull market. This surge in power came from the easing of the conflict in the US-China trade war and expectations of interest rate cuts by the Federal Reserve, but this inflow stopped abruptly after pushing the Bitcoin price to 120,000 US dollars.

After restarting interest rate cuts, funds once again tried to flow in at the end of September and pushed prices up to 126296 US dollars, but in October, the enthusiasm for fund inflows was suppressed due to the conflict between the United States and China, plus a serial explosion caused by the USDe problem by the market maker on the Binance exchange, which eventually led to the entire market removing nominal leverage of more than 20 billion US dollars, causing serious damage to the internal structure of the crypto market. After the change in the market structure in this cycle, the buying power in this bull market is concentrated on the DATs, Bitcoin Spot ETFs, and shark accounts channels. At present, DATs lacks buying power, Bitcoin Spot ETFs show outflows, and only shark accounts are constantly buying. In the future market, if the improvement of macro liquidity or increased political benefits lead to a return of bullish sentiment, and the buying power is reassembled, Bitcoin still has a chance to regain its gains and set a new record high. If the sentiment continues to be low and funds accelerate outflows, Bitcoin is likely to end this bull market in the fourth quarter. Conclusion Due to the lack of inherent growth, the current crypto market is still in the midst of a game between fund inflows generated by "macro liquidity + consensus diffusion" and the cyclical "collection-selling" behavior of long-term holder investors. At present, "macro liquidity + consensus diffusion" is still in progress but the momentum has weakened significantly, while the long-term holder group that believes in the "Cycle Law" adheres to its principles and continues to sell. This game is driving the Bitcoin price towards downward rebalancing. In the previous cycle form, this is the typical expression of the transition from the transition period to the downward period (bear market).

The form of the "new cycle" has not yet been determined, and we can only believe that the "end" of the bull market is in progress.