3 Reasons Bitcoin Struggles in September According to Bitwise

This week, Bitwise, the Bitcoin ETF manager, released a report detailing why September has historically been a challenging month for Bitcoin, and this year is no exception.

The asset’s disappointing performance can be attributed to three main factors: declining risk assets, actions taken by the SEC, and a negative feedback loop.

Bitcoin’s September Struggles

“Since its inception in 2010, bitcoin has seen an average decline of 4.5% every September,” stated Bitwise CIO Matt Hougan in a memo released on Monday. “This makes it the worst month for Bitcoin, along with August, which is the only other month with a negative average return.”

Typically, August also appears to be a rough month, averaging a 1.5% decrease in price each year. As of September 10, 2024, Bitcoin’s price has dropped 11.6% since August 1, with a notable 7% decline occurring just this September.

The phenomenon known as “the September effect” extends beyond Bitcoin. Historically, since 1929, September has been the only month during which stock prices decline instead of increase.

CME Group attributes this century-long trend of poor stock performance to the personal schedules of traders, who often look to rebalance their portfolios after the typically low-volume summer months. Additionally, many mutual funds end their fiscal years in September, prompting them to sell off underperforming assets to realize losses.

This September mirrors past patterns, with the NASDAQ 100 experiencing a 6% decline thus far.

The Securities and Exchange Commission (SEC) also plays a role, operating on a fiscal calendar from October to September. According to Bitwise, SEC lawyers tend to increase their enforcement actions during this month to fulfill their annual targets.

“We’ve already witnessed significant settlements, such as with Galois Capital and a Wells notice served to NFT platform OpenSea this month,” Bitwise observed. Hougan mentioned he has heard “rumors of larger enforcement actions” on the horizon, adding to the numerous proceedings already filed against major crypto firms over the past two years.

Lastly, the historically poor performance of September creates a self-reinforcing feedback loop, where traders preemptively sell their assets in anticipation of a weak month, further exacerbating market downturns.

“While it may not seem groundbreaking, it remains true: Expectations have the power to influence market movements,” he said.

Anticipating Uptober

Although September usually spells trouble for BTC, October often tells a different story. The month, informally dubbed “Uptober,” has seen an average return of 29.5% since 2010, followed by an astounding 37.5% average increase in November, making it Bitcoin’s most prosperous month historically.

Hougan suggests that there are several uncertainties looming over the crypto landscape. The outcome of the U.S. Presidential election, currently uncertain, could significantly impact crypto prices depending on who is elected. Additionally, investors are trying to gauge how aggressively the Federal Reserve will start lowering interest rates and the flow of institutional investments into Bitcoin ETFs.

“My expectation is that we will observe a substantial rally as this uncertainty begins to clear in October and November,” Hougan concluded.