Octobers have traditionally been very bad for stock markets, with several major crashes recorded over the past few decades. Will it happen again this month, and will the crypto market capitulate?
There is no doubting the fact that stock markets and crypto markets have been highly correlated this year. Both have been tanking since the beginning of the year, though the more volatile digital asset market has taken a bigger hit than tech stocks.
The month of October has seen catastrophic crashes in stock markets in 1987, 1990, 1997, and 2008 which resulted in generational lows.
On Oct. 17, Global Macro Investor CEO Raoul Pal highlighted these previous market crashes with a gloomy prediction that this month may see the same.
Primed to crash
The economics expert continued his analysis, concluding that 2022 could be another red October:
“October is always a scary month for markets, especially if we are in the midst of a recession (high probability). The typical summer fall into an October crash is playing out this time too…”
The grim facts and figures kept coming, as Pal pointed out that this bear market has been the largest destruction of wealth in history in dollar terms which has led to extreme levels of sentiment.
Crypto markets are also in deep bear territory, however, they have remained range bound for the past four months. Total crypto market capitalization has oscillated around the $1 trillion level since mid-June, but a big move may be around the corner.
With sentiment at rock bottom, down is likely to be the next direction for crypto markets, especially if there is an October stock slump. The Bitcoin fear and greed index is currently at 20 ‘extreme fear’ where it has been since the end of August.
Boring crypto market
A final capitulation event, just like the one that occurred in November 2018, could well be on the cards shedding a further 25% or more from prices.
Analyst Josh Rager said that the current market lethargy reminded him of September 2018, just before “the market went violent and nuked.”
At the time of writing, crypto markets have remained flat over the past day, with total capitalization at around $960 billion. Resistance for Bitcoin has been strong at $19,500 and Ethereum has failed to make much progress above $1,300.
The path of least resistance appears to be down at the moment.
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