While derivative markets underwent historic deleveraging with $19 billion in futures open interest wiped out, several macro developments are aligning to support crypto’s next leg higher.
The Dollar Index (DXY) has declined 0.5% this week, falling from Oct. 14 through Oct. 16, creating favorable conditions for risk assets.
A weaker dollar typically serves as a tailwind for Bitcoin through the global liquidity channel, with sustained DXY slippage often coinciding with stronger spot demand and narrower ETF discounts.
Lower-for-longer interest rate expectations from the Fed further support this dynamic by pulling real yields and the dollar down, easing financial conditions, and supporting ETF inflows.
The FOMC meeting this month looms as a potential catalyst, though excessive dovish positioning could create “buy the rumor, sell the news” dynamics.
Manufacturing data is important, as a continued display of weakness while price gauges remain sticky creates rate-path uncertainty, which typically keeps Bitcoin range-bound until the data skews clearly dovish.
Additionally, gold’s surge to over $4,300 all-time highs reinforces the debasement narrative that Bitcoin proponents have long championed.
Institutions framing Bitcoin as “digital gold” may add positions on relative-value grounds, though flows can lag as risk managers often allocate to bullion before rotating to crypto beta.
The precious metals rally validates concerns about currency debasement and monetary policy that could eventually impact Bitcoin demand, particularly as institutional investors seek portfolio diversification against traditional financial assets.
The Bank of Japan’s (BoJ) hawkish signals present both opportunities and risks for Bitcoin. While rapid yen strength has historically forced deleveraging across “long duration” tech and crypto assets, a gradual normalization process proves less disruptive.
More importantly, BoJ interest rate hikes could further weaken the dollar by reducing the interest rate differential between Japan and the US.
This dynamic would benefit risk assets, such as Bitcoin, by improving global liquidity conditions and reducing the dollar’s appeal as a funding currency.
Recent derivative market stress, while painful, has cleared excessive leverage that previously constrained Bitcoin’s upside potential.
This historic deleveraging event cleared excessive leverage across the system, reducing systemic risk and creating a more stable market structure.
Funding rates plunged to levels not seen since the FTX collapse in late 2022, with annualized funding briefly turning sharply negative.
Such extreme funding resets have historically coincided with peak fear and the final stages of deleveraging, often setting the stage for healthier recovery phases.
The Estimated Leverage Ratio collapsed to multi-month lows following the sharp contraction in futures open interest. This structural reset removes a key impediment to sustained price appreciation by reducing the likelihood of cascading liquidations during future rallies.
Long-term holders continue to distribute, with supply declining by roughly 300,000 BTC since July 2025.
This ongoing sell-side pressure emphasizes the risks of demand exhaustion, with the market likely to enter a consolidation phase before renewed accumulation begins.
Additionally, ETF flows have weakened alongside price action, with cumulative net flow turning negative by 2,300 BTC as of Oct. 15. However, the current moderation suggests hesitation rather than panic, contrasting with prior capitulation phases where outflows typically accelerated alongside price declines.
Key resistance lies at the $117,100 level, where 5% of the supply is currently at a loss. A sustained break above this threshold would likely trigger momentum toward Mena’s $130,000 intermediate target, potentially accelerating the timeline for reaching $150,000.
However, risks remain. Oil prices edging higher could reaccelerate inflation and temper expectations for rate cuts. Stronger housing and earnings data in North America might keep the Fed cautious, capping upside if real yields increase.
Any sharp dollar rebound would reverse current favorable conditions.
The path to $150,000 requires monitoring several key variables. If the dollar continues drifting lower while real yields ease, crypto’s path of least resistance remains upward.
