Bitfinex Alpha | Market stabilizes, but momentum remains tentative

October 21st Bitfinex Alpha | Market stabilizes, but momentum remains tentative

After the historic $19 billion market liquidation event on October 10, the cryptocurrency market stabilized within a narrow range. Bitcoin continues to defend key structural support at $107,500, the July air gap lower bound, which currently serves as an important floor. However, BTC remains below several key on-chain resistance levels, suggesting that although the downward momentum has weakened, the recovery phase is still tentative.

The 18.1 percent peak-to-trough drawdown seen this month is consistent with a retest of previous cycle highs from 2023 onwards, and typically indicates a phase of consolidation rather than a trend reversal. However, institutional investor demand has not yet returned decisively. Bitcoin ETFs recorded net outflows of over $1.22 billion last week, reflecting the stock market downturn. Long-term holders have also reduced their supply by approximately 300,000 BTC since July, and while new inflows have been delayed, they have been steadily taking profits. For now, the $107,000-$108,000 zone remains a key inflection point. Failure to sustain above this would indicate demand-side weakness and could lead to further localized drawdowns before equilibrium is restored.

The U.S. economy is entering a period of heightened uncertainty as the Federal Reserve is forced to operate without critical data amid a government shutdown. With official reporting on inflation, employment and spending suspended, policymakers are relying on private indicators to guide decision-making ahead of a meeting in late October.

There is no clear weakness or strength in the economy, and the Fed is divided on whether to cut rates further. Markets are pricing in a 25 basis point (bp) rate cut, but tight liquidity, volatile bond yields and widening credit spreads are underscoring growing worries about potential policy failures.

Inflation remains high, driven more by tariffs than by domestic demand. The new trade policy has increased core inflation by about 0.5 percentage points, with food and durable goods prices rising significantly. Food costs are currently the biggest source of consumer stress, with inflation expectations remaining high and the impact of future interest rate cuts limited. Manufacturing is feeling the squeeze, with rising input costs reducing factory activity, while the housing market is showing signs of early recovery thanks to lower mortgage rates.

Meanwhile, escalating US-China tensions are reintroducing global supply chain risks. China’s new export restrictions and the possibility of U.S. tariffs of up to 100% threaten to disrupt trade flows and raise costs. Although markets remain calm, supply-driven inflation risks have resurfaced as companies move production to Mexico and Southeast Asia.

The US cryptocurrency landscape is rapidly maturing as institutions and policymakers move to integrate blockchain into mainstream finance. At the policy level, Florida has introduced a bill that would allow up to 10% of the state’s public and pension funds to be invested in Bitcoin, tokenized assets, and crypto ETFs by 2026, a sign of growing acceptance of digital assets as a legitimate portfolio diversification tool.

Meanwhile, Ripple announced its acquisition of GTreasury for $1 billion, marking its expansion from blockchain payments to corporate finance infrastructure. The deal aims to further expose Ripple to corporate liquidity and cash management. Further building on this momentum, New York City has launched the Office of Digital Assets and Blockchain Technology in an attempt to uniquely position itself as a potential hub for responsible cryptocurrency innovation and institutional adoption.