From 5th to 8th of October, Bitcoin’s [$BTC] price slid by 7.59% from a peak of $87,000 to a low of $80,393. Since then, however, it has bounced back to trade at $82.8K at press time.
Now, even though the higher timeframe price structure has remained bullish, the buyers do not have a clear advantage. In fact, elevated market stress signals and net Bitcoin flows into exchanges showed why buyers should remain cautious.
A slight short-term $BTC tilt towards caution
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According to CryptoQuant, from 7th to 9th of October, 11,325 $BTC left exchanges. It was greater than the 7,520 $BTC in outflows from 3rd to 9th October, making the net flows inward.
Crypto analyst CoinNiel pointed to other factors, such as the dip in funding rates and the Open Interest decline compared to early October, to urge caution in the short term for the bulls.
While the negative Spot ETF flows and a long squeeze might help explain Bitcoin’s price dip, they have also placed the market under stress.
Bitcoin Stress Index reaches calm zone after a weekly peak of 49.9
The Bitcoin Stress Index measures the intensity of a sell-off through the dominance of market selling, wrote analyst Axel Adler Jr. The weekly peak of 49.9 came on 7th October.
Scores of 40-55 reflect elevated market stress. However, the 55-threshold has not been breached in three months.
The large wave of long liquidations on 7th and 8th October subsided though, reinforcing the idea of market sell orders in spot and perpetuals markets on 7th October.
The index has since fallen to a reading of 7 in calm territory. However, according to the analyst, a stress index reading above 55, combined with a price drop back below $80.7K, would be a strong warning sign.
As the 1-day chart revealed, the swing structure on the 1-day timeframe has remained bullish. The recent correction has only just dipped below the 50% retracement level at $81,230. While there is room for further drawdown to $77.7K, the structure has remained bullish.
Hence, short-term caution is warranted, but a move back above $83.6K could mean that the correction has likely ended.
Final Summary
- Bitcoin Market Stress Index peaked on 7th of October, before re-entering calm territory.
- Despite the decline in stress and the overall bullish swing structure, a short-term cautious $BTC outlook is warranted.
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