After a brief surge in Bitcoin’s value at the start of the week following a major upgrade to its network, the cryptocurrency has plunged to below $60,000 on Thursday. Several other leading cryptocurrencies, including Ethereum (ETH), Solana (SOL), and Cardano (ADA), as well as the coins often referred to as meme coins, Dogecoin and Shiba Inu, have also trimmed their gains over the past week. At the same time, many interesting events happened throughout the week. An important event worth noting was a large number of launches of gaming platforms – in general, very successful and profitable. Among the most talked-about projects to bring forward is GENE on the Bybit exchange, Solchiks on the Lightning launcher, the launch of the Gods Unchained game with a lot of giveaways, «extras» and bonuses for new players.

Meanwhile, Bitcoin closed its weekly downtrend candlestick pattern last Friday. Going forward, in order to maintain the uptrend, technical traders unanimously say it is essential to consolidate at the current resistance at $60,000, or above it. The “overheating” of the market and the unloading of the long position went quite well, so it’s time to move on.

Pic. 1. Popular Stock-to-Flow Model Shows Current BTC Price is Below the Trendline

As we already mentioned in our previous article, one single most important reason behind the ongoing Bitcoin correction is the fallout of the BTC’s soft fork called Taproot that occurred last week. Cryptocurrencies prices forecasting is a complex theme due to the still-elevated volatility, erratic market behavior, and influence of the often hard-to-foresee external events. As we already mentioned, there are several different, but quite effective approaches to tackle that. There is one common requirement to these price predictive models: they must offer, in addition to satisfying accuracy, reasonable interpretability, so that investors can make investment decisions based on their own knowledge. However, many studies in this subject focus on the model accuracy and leave much to be desired in terms of simplicity and interpretability.

I personally agree with the 2017-2021 patterns similarities voiced by Cointelegraph. Several pieces of data point to similarities in the patterns between the two cycles. Firstly, the relative strength index, RSI, which is very popular among traders who want to identify overbought and oversold markets, is tracing the same path as 2017. In 2013 and 2017, each cycle displayed two peaks, so if events follow the course, then we are still due a second catch-up microcycle.

But before we proceed to the next level, let’s summarize the performance of the crypto markets in October 2021, dubbed ‘Uptober’ – mainly to make sure we understand that the past month happened to be exceptionally good for most cryptos. October’s top 30’s coins market cap beat the September value by a substantial margin. October 2021, with 40% gains, became the best for Bitcoin price action since December 2020. In fact, September provided that very “buy the dip” opportunity for Bitcoin buyers many had hoped, and October’s momentum appeared to be even more solid than many would have expected.

Despite the Stock-to-flow model being widely used and referred to, I personally am more inclined to the monetary crypto model saying that the total market cap of all cryptos tends to follow the excess fiat currencies in circulation. In other words, assuming large portions of cryptos are bought for capital protection reasons, and cryptos are largely “digital gold”, the growth will slow down only once cryptos’ total cap reaches 8–8.5 trillion. I estimate the breakeven level at that range, meaning excess printed fiat money is measured against the market value of the issued cryptos (minus gold funds’ inflows, but for now they don’t show a lot of action, so we can safely neglect that).

Pic. 2. Comparative Analysis of Bitcoin Market Capitalization and the Impact of Federal Reserve’s Monetary Expansion

But let’s not forget that the money printing by central banks continues. Thus, across the latest headlines, Japan’s prime minister-elect outlined a record 56 trillion yen, or $490 billion stimulus package, including cash handouts and aid to ailing businesses.

Also, the above chart only tracks Bitcoin market cap (omitting for simplicity other major cryptos’ data in this respect), on one hand, and doesn’t factor other major central banks’, beyond the Federal Reserve, monetary base expansions. If we compared the total market cap of all cryptos (see below) with the world’s cumulative money printing pace, the result would be even more staggering.

Pic. 3. Total Market Capitalization of All Top Tier Cryptocurrencies