Bitcoin Dip in September? "Uptober" is Coming!Despite the cryptocurrency hitting a new low this month, reflecting Wall Streets September Effect, better days are ahead. Historically, September has been a rough month for the U
Bitcoin Dip in September? "Uptober" is Coming!
Despite the cryptocurrency hitting a new low this month, reflecting Wall Streets September Effect, better days are ahead. Historically, September has been a rough month for the U.S. stock market. The so-called September Effect is equally prevalent in the Bitcoin markets, and the first weeks performance of Bitcoins price has confirmed this theory.
The Wall Street phenomenon has been widely documented for almost a century. According to OpenMarkets, since 1929, the S&P 500 has had a 55% chance of dipping in September, being "the worst performing month by far, and the only one to experience a negative performance of at least 50% in the past 94 years. The analysis cites trader vacation schedules and financial company financial calendars as potential factors.
Bitcoins rally has been relatively short. However, the market witnessed substantial weakness in the first month of its decline. According to CoinGlass, Bitcoins price has declined eight times in September since 2013. This month, Bitcoins price started to drop beyond 8%, surpassing the average decline of 5% over the past decade. September is one of only two months where the average price has declined since 2013, with June being the only month with an average decline, at -0.35%, during that period. On average, September is the worst performing month for Bitcoin over the past decade.
While Bitcoin has only increased three times in September since 2013, Jake Ostrovskis, an over-the-counter trader at market maker Wintermute, told Decrypt that the declining trend is far from gospel. While the market likes to focus on the September Effect due to its historical performance, the sample size is small and hard to use as a leading indicator, he said, noting that Bitcoins return in September last year was close to 4%.
Ostrovskis pointed out that several other factors might be more critical in driving Bitcoins price movement in the near term. Liquidity trends, macroeconomic conditions, and the overall sentiment in the cryptocurrency market are more important metrics to watch than any calendar date, he said.
Zach Pandl, managing director of research at Grayscale, told Decrypt that its essential to consider outliers when looking at average returns. For example, the average return for Bitcoin in November is 46%, driven largely by the 2013 rally, when the assets price increased by 450%. Conversely, he said, the September Effect in stocks was influenced by the difficult years for the stock market in the 1930s.
Bitcoin prices rose slightly in September last year, and the average return for October has historically been the highest, Pandl said. So, we expect only the most impatient traders to be prepared for the September Effect, while most investors will focus on Bitcoins improving fundamentals, such as the upcoming Fed rate cuts and growing institutional adoption.
According to Investopedia, most economists believe the September Effect is an unexplained anomaly having little to do with the market. This is partly because it challenges the efficient market hypothesis, which suggests that the secondary market price of an asset will always reflect all available information.
Still, Bitcoins September weakness has often been followed by a bull run. Since 2013, the average decline for Bitcoin in September has been 5%, followed by a 22% rise in October and a 46% rise in November. During the crypto market bull run in 2021, this trend was known as Uptober.
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