Welcome to this week’s analysis on which altcoins are performing well and which ones are not. You can view the list here:
Macro Update
For future newsletters, I’m going to try to cover both short term and long term outlooks. I tend to focus on the long term because much of the short term is fairly chaotic and mostly noise but I recognize many find it helpful to still see what could come next in the short term. Here’s what we’ll cover for macro plus the usual analysis of the Large Caps of interest:
- Short Term Outlook
- The House Always Wins: Bitcoin Max Pain at $110K
- The Looming US Government Shutdown
- Long Term Outlook
- US PMI vs % of Central Banks Cutting Rates
By the next newsletter, we should have the latest PMI prints and I can also refresh the earnings revisions data since both are on a monthly basis.
The House Always Wins: Bitcoin Max Pain at $110K
Shoutout to InvestAnswers for the inspiration on this topic today. I see many concerned about Bitcoin going sideways and the sudden volatility and what could be suppressing the price. One of the factors is the derivatives market for crypto. Like traditional finance, this is something that will continue to grow over time and become more regulated which should actually lead to volatility compressing over time. Bitcoin is in this transition phase of going from an immature asset to a more mature one since the introduction of the spot ETFs in 2024. However the derivatives market is still in its infancy and with that, we have short term pricing dominated by institutions and market makers. Because of the smaller market cap of crypto, it does not take much to move the price relative to traditional finance. Let’s go into more detail on the Bitcoin options market, the actors involved and who stands to benefit.
When it comes to Bitcoin options expiry, think of the market like a casino:
- Market makers = the dealer. They usually sell options, and their goal is to keep as much of the pot as possible.
- Retail traders = the players. They buy calls and puts, hoping for a big win if Bitcoin makes a strong move.
The key level to watch is Max Pain — the price where the most players lose and the dealer wins big.
Market makers hedge aggressively into expiry, buying and selling Bitcoin to protect themselves. This flow tends to “adjust the odds,” nudging price toward Max Pain.
For this quarter’s expiry, that number sits around $110K and it was already hit on September 26.
The Looming US Government Shutdown
Many are concerned about the US government shutting down and yet this drama seems to happen every year and markets power through it. What I’ve learned over the years is that price precedes news events and while market makers don’t control headlines, when something like the looming US government shutdown hits, they can use that volatility as cover to steer price toward the dealer’s winning number.
This is why looking at the bigger picture helps see through the short term noise. For example, take a look at this chart:
Bottom line for the short term: Expect volatility through the end of September and early October as quarter-end options settle and shutdown risk plays out. Price action may feel random, but the casino dynamics around Max Pain help explain why Bitcoin often clusters near certain levels at expiry.
US PMI vs. % of Central Banks Cutting Rates
Shoutout to Julien Bittel for the inspiration to create this indicator. He covered a variation of this in another X post as well as in the recent Everything Code Update. When we look beyond the noise of quarter-end flows and political headlines, long-term indicators remain constructive. One of the most reliable global liquidity signals is the percentage of central banks cutting interest rates. I’ve been covering the US PMI a lot lately because it’s so critical with it’s impact to liquidity and risk assets. As a recap, The Purchasing Managers’ Index (PMI) is one of the best real-time gauges of economic activity. It captures how businesses feel about orders, production, hiring, and inventories. But it tends to react to changes in credit conditions rather than lead them.
That’s where central bank rate cuts come in:
- Cheaper Credit: When central banks cut rates, borrowing costs fall for companies and households. This lowers the hurdle for financing new projects, restocking inventories, or hiring staff.
- Liquidity Transmission: Easier policy boosts money supply and risk appetite. Banks are more willing to lend, and investors shift toward growth assets. This ripple effect takes months to filter through balance sheets.
- Business Response: With credit flowing again, businesses start to report stronger new orders and better sentiment — exactly what PMI measures.
After pulling the historical data on % of central banks cutting rates along with US PMI, I ran a correlation analysis to find the optimal lead times for various timeframes:
Historically, the effects of central banks cutting show up ~9 months later as an improvement in PMI.
Since 2008, under QE and forward guidance, the transmission has slowed to ~11–12 months, as policy signals take longer to influence global liquidity flows. This suggests the US PMI still has room to go higher through Q2 2026.
Central bank cuts are like priming the pump. The liquidity doesn’t boost activity overnight, but as it works through the system, it shows up in PMI with a lag — making it a reliable leading indicator of the business cycle.
Bitcoin Update
Bitcoin is roughly at the same level from last week with some short term downside. I think the bottom is more or less in. It’s possible we continue sideways through early October as I mentioned earlier with the options expiry and the US government shutdown. I think we’re potentially forming an inverse head & shoulders pattern which suggests more upside and we could finally see the next major leg higher. When you zoom out, this setup is still very bullish and once again just requires more patience. To break out of this sideways pattern, we need to see Bitcoin break above $117,800 and it should make a run for all-time highs.
We also have this indicator Short Term Holder Bollinger Bands that suggests the local bottom is in:
Then you also have RSI being most oversold since $74k:
Finally, when we look at Bitcoin Seasonality in Q4, history shows that October and November tend to do very well and December is mixed:
Source: Coinglass
Ethereum Update
I covered in the last newsletter “It’s possible it drops lower to around $3800-4000 before resuming the uptrend.” Since then Ethereum dropped to around $3800 and has since bounced to $4100. Similar to Bitcoin, it could go sideways around these levels in the short term (early to mid October). Otherwise I see a bounce from here to new all-time highs. Once firmly above all-time highs, we will see the rest of the altcoin market catch up in due time.
Solana Update
Solana touched down just below $200 but has since bounced above. Once Bitcoin starts moving higher again, I expect Solana to follow and eventually make new all-time highs.
Solana vs. Bitcoin is testing former resistance as support and I’m still expecting this to go higher. I’m still sticking with my theory that we’re about to witness a surge higher similar to what we saw in the second half of 2024.
Dogecoin Update
Still roughly the same update as last week. We either bounce here or bearish case is sideways between 0.20-0.30 before going higher. I think we’re about to see a repeat of Q4 2024 where we had a parabolic move. My targets are at least 0.74 and then potentially 1.13.
Sui Update
Sui fell below $3.50 so it looks like we continue sideways between $3-4 before going higher. It has dipped below the long term trendline but I think it will likely reclaim soon given the larger bullish backdrop.
Large Caps
For large caps, here’s the ones that stand out on a long term timeframe:
- XRP
- Stellar
- TRON
- Hyperliquid
Pepe going sideways with the rest of the market but still expecting higher once Bitcoin and Dogecoin start picking up again.
Model Portfolio Update
We added to some more positions on this dip.
The open positions is showing a positive return of roughly 24%:
The overall portfolio performance considering closed positions is roughly a 10% positive return:
We added to this dip a coin that we think will benefit from the AI infrastructure boom. To see the detailed analysis on Mid Caps and Small Cap sector outperformers as well as the complete portfolio, sign up and become a pro today and gain an edge in the crypto market.