3 Reasons Why Bitcoin Has Underperformed in September – Bitwise

bitcoin ETF manager Bitwise released a report this week explaining why almost every September (including this one) is a bad month for bitcoin.

The poor performance of assets is due to three factors: the decline in risk assets, SEC enforcement actions, and a negative feedback loop.

bitcoin's melancholy in September

“Since bitcoin began trading in 2010, the asset has fallen by 4.5% on average during September,” Bitwise CIO Matt Hougan wrote in a Monday Memo“This is by far the worst month and one of only two months with a negative average return.”

The other typically negative month for bitcoin is August, which sees an average price drop of 1.5% each year. As of September 10, 2024, the price of bitcoin has fallen by 11.6% since August 1, including a 7% loss in September alone.

The “September effect” didn’t start with bitcoin. Since 1929, September has historically been the only month in which stocks fall instead of rise.

CME Group stocks.html” data-wpel-link=”external” target=”_blank”>attributes The century-long history of poor stock market performance and the holiday schedules of traders, who often seek to rebalance their portfolios after periods of low-volume summer trading and sideways fluctuations, also end the fiscal year in September, incentivizing them to purge their portfolios and reap investment losses at that time.

This September is no different, with the Nasdaq 100 down 6% this month.

Then there’s the Securities and Exchange Commission (SEC), which also operates on an October-September schedule. Bitwise says SEC attorneys tend to ramp up their enforcement actions this month to meet their annual quotas.

“We’ve already seen a significant settlement with crypto funding provider Galois Capital, as well as a Wells notification against nft platform OpenSea this month,” Bitwise noted. Hougan added that he’s heard “rumblings of more significant enforcement actions” coming, adding to actions already brought by the agency against the world’s largest crypto firms over the past two years.

Finally, the poor timing of September and its history of disappointments for markets has created a reflexive feedback loop, with traders selling their assets in preparation for a poor September, further contributing to the market decline.

“While this may not seem surprising, it is no less true: expectations move markets,” he said.

Wait for Uptober

While September is typically a dismal month for btc, the following October is anything but. The month, colloquially known as “Uptober,” has seen an average return of 29.5% since 2010, followed by average gains of 37.5% in November, bitcoin’s best month ever.

Hougan believes there are also several uncertainties for cryptocurrencies on the horizon. The US presidential election, which is currently being contested, could send crypto prices up or down depending on whether Donald Trump is elected. Investors are also unsure how aggressively the Federal Reserve will begin cutting interest rates and how much more institutional flows bitcoin ETFs will attract.

“My baseline assumption remains that we will see a significant rebound as this uncertainty begins to dissipate in October and November,” Hougan concluded.

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