BTC Uptober Depends On Fed Rate-Cut Odds, Stocks

Key takeaways:

Bitcoin is down 4.3% in October despite historically strong monthly returns.
The CME FedWatch tool shows a 96.7% probability of a 25% interest rate cut, fueling optimism.
Inflows into the spot Bitcoin ETFs and equities correlation hint at a potential rebound.

Bitcoin (BTC) may be down 4.3% in October so far, but optimism around the month’s historically bullish trend remains intact. Since 2019, Bitcoin’s average October gain has stood near 20%, with a median return of roughly 15%. While this year’s performance currently lags, market participants are looking to macroeconomic policy shifts for potential fuel.

According to the CME FedWatch tool, the probability of a Federal Reserve interest rate cut now stands at 96.7% for a 25-basis-point reduction. A cut in interest rates generally signals more liquidity entering the system, reducing borrowing costs and supporting risk-on sentiment across asset classes, including cryptocurrencies like Bitcoin.

Fed Reserve interest rate cut probability. Source: CMEGroup

Institutional flows appeared to be front-running this narrative. Spot Bitcoin exchange-traded funds (ETFs) have absorbed nearly $5 billion in net inflows in the first two weeks of October, indicating renewed confidence from large investors.

Meanwhile, Cointelegraph reported that total institutional holdings across public companies have now climbed to $117 billion, a 28% quarterly rise, with over one million BTC collectively held in corporate treasuries. 48 new entities joined the cohort in Q3, expanding institutional reach further into digital assets.

Stock correlation hints at Bitcoin’s next move

Bitcoin’s current weakness can also be linked to the US equities market. Macroeconomic analyst Jesse Colombo said that Bitcoin’s 92% correlation with the Nasdaq makes it a “leveraged play on tech stocks.” This was on display last Friday when the S&P 500 fell 2.7%, the Dow Jones 1.9%, and the Nasdaq 100 Composite over 4.2%, their sharpest daily drops since April, dragging Bitcoin down alongside them.

Cryptocurrencies, Federal Reserve, Bitcoin Price, Investments, Markets, United States, Cryptocurrency Exchange, Interest Rate, Bitcoin Futures, Binance, Price Analysis, Stablecoin, Market Analysis — *BTC, SPX, DJI, and NAS100 correlation. Source:* *Cointelegraph/TradingView*

The sell-off stemmed from renewed trade tensions between the US and China, after reports of potential 100% tariffs on Chinese imports, which rattled risk sentiment. However, as markets stabilized early this week, US stocks began recovering, though Bitcoin’s rebound has lagged.

According to the Director of Global Macro at Fidelity, Jurrien Timmer, the recent pullback resembled the late-1990s “super bull” phase, when speculative assets saw sharp but temporary drawdowns before surging higher again.

If US equities sustain their recovery heading into earnings season, it could create favorable conditions for Bitcoin’s own upside revival. A renewed rally in tech and growth stocks, bolstered by easier monetary policy, might help extend “Uptober” optimism into a stronger finish for the month.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.