Asian Holiday and US Shutdown Add Volatility Risk for Bitcoin in October

TLDR

• Bitcoin historically shows flat or negative returns during Golden Week holidays.
• The US government shutdown delays key economic data affecting Bitcoin.
• Low liquidity from Asia and US shutdown could lead to volatile Bitcoin moves.
• Derivatives data show cautious sentiment with falling open interest and put options.

Bitcoin’s performance in October faces uncertainty, influenced by the annual Golden Week holiday in Asia and a partial government shutdown in the U.S. The combination of reduced market participation from Asia and delays in U.S. economic data could create a volatile environment. As markets respond to these external factors, Bitcoin’s price action in the early part of the month remains unpredictable. The effects of this situation are examined by research firm K33.

Asian Holiday Lull and Its Effect on Bitcoin

The start of October sees the Chinese Golden Week, a week-long national holiday that typically reduces trading volume in Asia. This seasonal lull in market participation can result in muted activity, and Bitcoin has historically shown flat or negative returns during this period.

Vetle Lunde, Head of Research at K33, notes that Bitcoin tends to trade flat when Asian markets are quieter. The reduced liquidity makes it harder to expect any major price moves early in the month.

The holiday also overlaps with market closures in South Korea, adding further strain to trading volume. These closures combined with the seasonal slowdown mean Bitcoin’s performance could remain subdued in the first few days of October. K33’s analysis points to the consistent underperformance of Bitcoin during Asian trading hours, with year-to-date compounded returns showing a 9.7% decline in this session. This suggests that when Asian markets are less active, Bitcoin often faces a challenging time.

U.S. Government Shutdown Adds to Uncertainty

In addition to the Asia holiday lull, Bitcoin’s October outlook is clouded by the U.S. government shutdown. The shutdown began on October 1, as Congress failed to pass a funding bill. With essential government services halted, critical data releases such as jobs and inflation reports are delayed. This adds another layer of uncertainty to the market, as U.S. economic data is often a key driver for price action.

The impact of the shutdown may not be immediately clear, but delays in data releases could disrupt the expected market trend. K33 warns that this could lead to erratic price movements, especially during the overlap of Asian and U.S. trading hours. As liquidity thins out during this period, traders could be exposed to unexpected volatility, which might lead to larger price swings in either direction.

Low Liquidity and Market Caution

Bitcoin has remained in a consolidation phase over the past weeks. While it recovered from late-September lows, it still faces low liquidity and cautious market sentiment. Metrics from derivatives markets show that open interest in Bitcoin futures has fallen to five-month lows. Funding rates are also hovering below neutral, signaling that traders are not overly bullish at the moment.

Options traders have shown a preference for puts, indicating a general sense of caution in the market. The thin liquidity and reduced participation during both the Asian holiday season and the U.S. shutdown could result in an unpredictable trading environment. Bitcoin’s price may struggle to find a clear direction unless there is a significant shift in market dynamics.

Altcoin ETFs and Market Movements

Amid these broader market conditions, K33 also examines potential movements in altcoins, specifically Solana (SOL) and Litecoin (LTC). The U.S. Securities and Exchange Commission’s approval of spot exchange-traded funds (ETFs) for altcoins like Solana and Litecoin could have an effect on the overall crypto market. However, the government shutdown may delay the timeline for these ETFs to launch.

Grayscale’s influence on the market also plays a role in the performance of certain altcoins. With a smaller portion of Solana’s circulating supply controlled by Grayscale, there is less risk of forced selling once its trust is converted into an ETF.

In contrast, Litecoin’s larger Grayscale holdings could create downward pressure on its price, particularly if the ETF is launched. Lunde suggests that a “long Solana, short Litecoin” strategy could prove attractive if the ETF developments unfold together.

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