As a seasoned market analyst with over two decades of experience under my belt, I have witnessed my fair share of market fluctuations and trends. The report by Bitwise on Bitcoin’s September blues is a stark reminder of one of the many idiosyncrasies of the cryptocurrency market.
Bitcoin ETF manager Bitwise published a report this week explaining why almost every September – including this one – is a bad month for Bitcoin.
The poor showing of this asset can be attributed to three key reasons: declining market conditions for risky investments, regulatory actions taken by the SEC, and a self-reinforcing pattern of negative results.
Bitcoin’s September Blues
In a memo released on Monday, Bitwise CIO Matt Hougan stated that since bitcoin began trading in 2010, it has experienced an average decline of 4.5% during the month of September. This makes September the worst performing month, and one of only two months to have a negative average return.
Historically, the month of August tends to be unfavorable for Bitcoin, with an average annual decrease of about 1.5%. As of September 10, 2024, Bitcoin’s price has experienced a drop of 11.6% since August 1, with a further decline of 7% in the month of September.
Historically, it’s not just Bitcoin that’s subject to the ‘September effect’. Since 1929, it’s been observed that stock markets tend to decrease in value rather than increase during the month of September.
As a crypto investor reflecting on market trends, I’ve noticed an interesting pattern: The CME Group suggests that the century-long history of subpar stock performance might be linked to traders taking vacations, particularly during summer months when trading volumes are low and markets move sideways. This seems to prompt many investors to reassess their portfolios after these periods. Moreover, it’s common for mutual funds to wrap up their fiscal year in September, which encourages them to offload assets and claim investment losses at that time.
This September is no different, with the NASDAQ 100 down 6% this month.
Additionally, we have the Securities and Exchange Commission (SEC), operating on a fiscal year that extends from October to September. As stated by Bitwise, it’s common for SEC attorneys to intensify their regulatory actions during this particular month as they aim to fulfill their annual targets.
This month, Bitwise has reached a significant agreement with cryptocurrency fund provider Galois Capital and also received a Wells notice from NFT platform OpenSea. Hougan mentioned that there are whispers of more extensive enforcement actions on the horizon, adding to the actions previously taken against major crypto companies by the agency over the last two years.
Ultimately, the unfortunate timing and history of market letdowns during September have set off a self-reinforcing cycle. Traders are now offloading their investments in anticipation of another disappointing September, which in turn exacerbates falling markets.
Although it may not seem groundbreaking, it’s still accurate: Market movements are driven by expectations, he pointed out.
Wait for Uptober
Typically, September brings sadness to BTC investors, but the trend flips dramatically for October, often referred to as “Uptober”. On average, it has yielded a return of 29.5% since 2010, with November following suit at an even higher 37.5% – Bitcoin’s most profitable month historically.
Hougan indicates that there are multiple potential risks looming for cryptocurrencies. The upcoming U.S. Presidential election, which is still uncertain, could significantly influence crypto prices based on whether Donald Trump wins or not. Furthermore, investors are questioning the extent to which the Federal Reserve may reduce interest rates and how much more institutional investment Bitcoin ETFs might draw in.
In simpler terms, Hougan predicts a notable surge will occur around October and November once the current uncertainties begin to clear up.
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2024-09-10 20:03