As the crypto market steps into September, many investors brace themselves for a challenging month. Historically, this period has been marked by declines, particularly for leading digital assets like Bitcoin and Ethereum. Data indicates a consistent drop in value over several years during this month, prompting questions about whether September truly deserves its gloomy reputation in the crypto world.
Looking back over the past five years, Bitcoin has experienced an average drop of 8.5% during September. Ethereum has followed a similar pattern, also with an 8.5% decline over the same period. The statistics suggest that early fall is unfavourable for digital currencies, driven by factors such as market liquidity issues and external economic forces. Yet, while history paints a negative picture, some industry experts suggest that this year could break the trend.
Let’s figure it out together in the regular blog from HiRiBi.
Historical Trends in September
Bitcoin’s track record during September has been bleak. According to data from Bespoke, this month has seen Bitcoin’s price rise only 28.6% of the time since 2014. Ethereum shows similarly poor performance, having risen just 25% of the time in the same month since 2017. This consistent downturn sets the stage for a pessimistic outlook each year.
However, it’s crucial to consider the reasons behind this recurring trend. Many analysts point to a combination of market liquidity drying up in the summer months, and broader economic uncertainties as key drivers. When liquidity is low, investors are often more hesitant, leading to price volatility and declines. September has also historically coincided with key economic events, including the Federal Reserve’s policy updates, adding further uncertainty to the market.
Factors Affecting Crypto in September
Aside from seasonality, macroeconomic factors weigh heavily on cryptocurrencies during this time. The Federal Reserve’s ongoing discussions around interest rate adjustments play a significant role in shaping market sentiment. With investors uncertain about future rate hikes or cuts, riskier assets like cryptocurrencies often see increased selling pressure. This leads to further price drops, adding to September’s reputation as a bad month for digital assets.
In addition to economic policies, broader market sentiment is influenced by geopolitical events, elections, and other financial shifts. For instance, speculation around U.S. election outcomes can add both optimism and fear, depending on how new regulations or leadership might affect the crypto market. This year, political movements may again contribute to how digital currencies perform.
Could September 2024 Be Different?
Despite historical trends, not everyone is convinced that September 2024 will follow the same path. One of the founders of the Glassnode platform recently pointed out that this year, September began with what he called “growth catalysts.” He emphasized the contrarian view by referencing the famous phrase, “When everyone expects something, the opposite usually happens.” This highlights the possibility that the pessimistic expectations for this month could lead to a surprising upside.
An analyst on X, Rekt Capital, known for his detailed Bitcoin cycle analysis, also offers a more optimistic perspective. Rekt Capital points to Bitcoin halving cycles, suggesting that historical patterns indicate a potential bullish impulse by the end of September 2024. According to his analysis, Bitcoin typically consolidates for about five months mid-cycle, followed by a breakout, with past halvings showing an upward movement around 150-160 days post-event. While Rekt Capital acknowledges that September’s historical returns are modest at best, he sees the possibility of consolidation extending into October, a historically stronger month for Bitcoin, with average returns of +22.9%.
Further supporting this view, QCP Capital highlights aggressive call option purchases for the September to December period, signalling expectations of positive momentum in the near term. Although current sentiment remains gloomy due to factors like miner selling pressure, QCP Capital believes the market could see significant moves as the year progresses, particularly with U.S. election dynamics adding fuel to potential price action.
In contrast, institutional activity, particularly within the ETF market, remains subdued, reflecting cautious optimism as investors await clearer signals for a sustained rally. Nevertheless, structural shifts in the market, such as Ethereum’s continued evolution and global economic developments, may contribute to a more favourable environment than in previous September months.
Is It Time to Worry?
Investors are right to approach September with caution, given the market’s history. However, it’s important to remember that while past performance can offer insights, it is not a definitive guide to the future. Cryptocurrencies remain inherently volatile, with prices reacting swiftly to news, tweets, and macroeconomic changes.
Moreover, crypto investors are increasingly focusing on long-term strategies rather than trying to time the market. Financial advisors typically suggest keeping only a small portion of one’s portfolio in crypto—between 2% to 5%—to mitigate risk. This allows for participation in potential gains while reducing exposure to the sharp declines often seen during months like September.
Final Thoughts
While September has long been regarded as a difficult month for cryptocurrency, 2024 presents unique circumstances that may break this cycle. Historical patterns point to consistent losses for both Bitcoin and Ethereum, but factors like Federal Reserve policy changes and political developments could provide a more optimistic outlook this year. As always, crypto investors must remain cautious, balancing their portfolios with a view toward long-term resilience rather than short-term gains.
Ultimately, September may prove to be another rocky month for crypto, but as many in the industry say, when everyone expects the worst, the market can often surprise.
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