Bitcoin (BTC) Needs to Clear Retail's Long Positions Before Uptober Starts

Bitcoin (BTC) is making a positive September despite the historically negative returns during what the market calls the “September Effect.”

Bitcoin (BTC) is making a positive September despite the historically negative returns during what the market calls the “September Effect.” Now, traders and investors are looking ahead to the upcoming “Uptober,” the market’s moniker for a historically positive month, October.

As reported by Finbold on September 24, an analysis by J.P. Morgan analysts showed that Bitcoin has historically delivered an average loss of 3.72% during September. However, the BTC price has registered gains of nearly 8% so far this month, according to data retrieved by Finbold from CoinGlass on September 25.

Bitcoin monthly returns. Source: CoinGlass

Notably, October has average and median results of 22.9% and 27.7%, respectively, since 2013, explaining the moniker. Meanwhile, the “September Effect” results in a negative 3.72% and 4.35% average and median for the current month.

In 2023, Bitcoin gained 28.52% from Uptober’s opening to closing after having a 3.91% September. Interestingly, BTC only had two losing Octobers in its history. One in 2014, down 12.95%, and most recently in 2018, down 3.83%.

Bitcoin needs to clear retail’s long positions before Uptober starts

However, BTC still has significant liquidity to the downside, given a bullish momentum growing amid long-position traders. Ideally, from a technical and psychological perspective, Bitcoin first needs to clear retail’s long positions before Uptober starts.

This is because whales, market makers, and institutional traders require liquidity to profit, usually moving against market trends.

Looking at the two-week liquidation heatmap, we can see three points of high liquidity, likely targets for the big players. In particular, the downside accumulates the two most significant pools at $62,000 and $57,000.

Bitcoin two-week liquidation heatmap. Source: Coinglass

While Bitcoin can move into the “Uptober mode” without clearing these levels, liquidity pools are strong magnets worth considering. Essentially, the market has a high chance of first seeing an aggressive move down, liquidating these longs, before moving up.

Bitcoin (BTC) price analysis

As of this writing, Bitcoin trades at $63,380, in what could be the start of a downside move. Yet, BTC moves in a short-term uptrend, making higher lows and higher highs in the seven-day time frame.

The first long squeeze targets are right below the first higher low in the weekly chart, while the short squeeze liquidity pools lie above the higher highs.

Indeed, most reputable analysts are calling for lower prices before Bitcoin can enter its “full bull gear.” Alan Santana has been really vocal about his BTC bearish analyses, as Finbold reported on different occasions. Most recently, Santana warned that Bitcoin first needs to crash and produce one major low before Uptober starts.

Nevertheless, the trading expert is bullish on altcoins, joining other traders who believe “an altseason is just around the corner” as mid and small-caps are breaking out of a downtrend, as we published earlier today.

In summary, Bitcoin may visit lower levels before it sets a clear path for sustainable growth in October, potentially consolidating its historical positive performance and delivering yet another Uptober in 2024.