Bitcoin-Fees_shutterstock_2162884391-gID_7.jpg@png” />
In summary
- September has historically been a tough month for US stocks and also for Bitcoin, with a phenomenon known as the “September Effect.”
- Since 1929, the S&P 500 has declined in September 55% of the time, and Bitcoin has seen notable weakness in this month since 2013.
- While the “September Effect” is a well-known trend, experts like Jake Ostrovskis and Zach Pandl point out that other factors, such as macroeconomic conditions and market sentiment, are more important in predicting Bitcoin’s price action.
September has historically been a tough month for U.S. stocks. And when it comes to the Bitcoin market, the so-called “September Effect” could be just as prevalent, and BTC’s price performance in this first week supports the theory.
The Wall Street phenomenon has been widely documented for nearly a century. Since 1929, the S&P 500 has declined in September 55% of the time, according to Open Markets, “(September) is by far the month with the most declines, and the only month that (the S&P 500) has fallen at least 50% of the time in the past 94 years.”
The analysis cites traders’ vacation schedules and financial firms’ tax calendars as possible factors.
Bitcoin’s track record is comparatively short. However, the market has seen notable weakness during the first month of autumn. Since 2013, the price of Bitcoin has declined in September eight times, according to data from CoinGlass.
The asset’s price has started this month down by over 8%, outperforming an average drop of 5% over the past decade. September is one of only two months that has had average losses since 2013, with June being the only other negative month with an average price move of -0.35% over that period. September is by far Bitcoin’s worst month in the past decade, on average.
While Bitcoin has only emerged from September in the green three times since 2013, Jake Ostrovskis, an OTC trader at market maker Wintermute, told Decrypt that the downtrend is far from gospel.
“While the market likes to focus on the ‘September Effect’ due to its historical performance, the small sample size makes it difficult to use as a leading indicator,” he said, noting that Bitcoin returned nearly 4% last September.
Ostrovskis pointed to several other factors that drive Bitcoin’s price action in the short term and that likely carry more importance. He said liquidity trends, macroeconomic conditions and overall Cryptocurrency market sentiment are better indicators to watch than any date on the calendar.
When analyzing average returns, it’s important to consider outliers, Zach Pandl, director of research at Grayscale, told Decrypt.
For example, Bitcoin’s average return of 46% in November is heavily influenced by gains in 2013, when the asset’s price rose by more than 450%. In contrast, he said a few tough years for the S&P 500 in the 1930s have contributed to the September Effect in the stock market.
“Bitcoin price rose slightly last September, and October has historically had the highest average returns,” Pandl said. “Therefore, we would only expect the most impatient traders to position for any September Effect, with most investors focusing on Bitcoin’s improving fundamentals, such as upcoming Fed rate cuts and growing institutional adoption.”
Most economists view the September Effect as an unexplained anomaly with little relevance, according to Investopedia. That’s partly because it challenges the efficient market hypothesis, which holds that an asset’s secondary market price will always reflect all available information.
Still, Bitcoin’s weakness in September has often been followed by significant gains. Since 2013, Bitcoin’s average 5% drop in September has been followed by a 22% rise in October and a 46% jump in November. During the 2021 cryptocurrency market bull run, this trend was dubbed “Uptober.”
Edited by Ryan Ozawa and Andrew Hayward
Daily Debrief Newsletter
Start every day with the top news stories right now, plus original features, a podcast, videos and more.
Crypto Keynote USA
For the Latest Crypto News, Follow ©KeynoteUSA on Twitter Or Google News.