The September Curse: Why Does Bitcoin Always Underperform in September?September has become a haunting spell for Bitcoin, a curse that seems to linger. Since its inception in 2010, Bitcoin has averaged a 4
The September Curse: Why Does Bitcoin Always Underperform in September?
September has become a haunting spell for Bitcoin, a curse that seems to linger. Since its inception in 2010, Bitcoin has averaged a 4.5% drop in September. Data reveals that September is Bitcoin's worst-performing month, one of only two months with an average negative return. So what causes this "September effect"? This article will explore three prominent theories and analyze the impact of September on the cryptocurrency market.
Data Reveals: September's Unbreakable Bond with Bitcoin
Let's take a look at the data. According to Bitwise Asset Management, Glassnode, and ETCGroup, Bitcoin has exhibited varying average returns each month from August 2010 to September 2024. September stands out with its negative value, emerging as Bitcoin's worst-performing month.
Further analysis reveals that Bitcoin declined in nine out of 13 Septembers on record. September 2011 witnessed Bitcoin's worst performance in history, plunging by 41.2%. This September, Bitcoin has already fallen by 7%, suggesting a continuation of this "September curse."
Three Theories: Deciphering the September Effect
Experts and scholars have proposed various theories to explain the "September effect," with the most prominent three being:
1. September is a "Doom Month" for All Risk Assets: The impact of September isn't limited to Bitcoin; other risk assets, particularly tech stocks, often underperform in September. Since 1929, September is the only month where the stock market has declined more often than it has risen. The Nasdaq 100 index, heavily weighted with tech stocks, is significantly impacted by the September effect. While economists attempt to explain this phenomenon by factors such as heightened volatility after the summer economic slowdown and mutual funds incurring losses at the end of the fiscal year, the exact cause remains inconclusive. However, this phenomenon has recurred this year, with the Nasdaq 100 index declining by nearly 6% in September, confirming the negative impact of September on risk assets.
2. SEC Enforcement Season Puts Pressure on Cryptocurrencies: The US Securities and Exchange Commission (SEC) operates on a fiscal year from October to September. This means September is typically a period of concentrated SEC enforcement activity, as lawyers strive to fulfill their annual enforcement quotas before the end of the year. This September, we saw the SEC's settlement with crypto fund provider GaloisCapital and the Wells notice issued to NFT platform OpenSea. As time progresses, more lawsuits and settlements against crypto entities are expected to become more frequent. While the extent of the impact of SEC enforcement season on the September effect remains unclear, it undoubtedly poses a significant pressure on the cryptocurrency market.
3. Reflexivity: Market Driven by Expectations: The final theory suggests that the September effect might simply be a self-reinforcing outcome. The widespread expectation of poor September performance, in turn, influences market behavior, ultimately causing the September decline. While this theory might sound simple, the influence of market expectations on market activity cannot be ignored. For Bitcoin investors, October is referred to as "Uptober," as Bitcoin historically averages a 30% gain in this month. Such positive expectations might ignite investor enthusiasm, leading October and November to be "golden periods" for cryptocurrency investors.
Uncertainty: The Deeper Roots of the September Effect
Currently, we cannot pinpoint which theory has the most significant influence on the September effect. It could be a combined effect of multiple factors, or there might be some undiscovered forces at play. Regardless, the September effect is actively shaping the current market sentiment.
Focus on Specific Market Conditions: Insights into the Causes Behind September's Weakness
Beyond seasonal factors, we should pay attention to the specific conditions of the current market. This September, the cryptocurrency market faces numerous uncertainties, which could be the primary reason for its weak performance.
- Significant Impact of the US Presidential Election: The upcoming US presidential election will have a significant impact on cryptocurrency policies, and the current election outcome remains uncertain. Different candidates will implement different policies, which will have varying impacts on the cryptocurrency market.
- Uncertain Expectations for Fed Rate Cuts: The timing and magnitude of Fed rate cuts are still under debate. While the market broadly anticipates a loose monetary policy, investors are readjusting their bets, creating market instability.
- Mixed ETF Flows: While Bitcoin and Ethereum ETF inflows have declined, investment advisors are adopting Bitcoin ETFs at a faster pace than any new ETF in history.
Looking Ahead: Can October Break the Curse?
Despite September's unfriendliness towards the cryptocurrency market, I remain optimistic about the future. As uncertainties dissipate in October and November, the market is expected to rebound. This aligns with historical trends, but it might also be a mere coincidence. Whatever the case, I will be prepared for the challenges ahead.
In conclusion, the September effect is a complex issue with no easy explanation. However, we should focus on market fundamentals and maintain a sober mind. September is just a month; it won't alter the long-term development trend of cryptocurrencies.
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