Bitcoin’s Historical September Struggles: A Prelude to “Uptober” Gains

Cryptonews John Brightwater September 7, 2024

Bitcoin’s Historical September Struggles: A Prelude to “Uptober” Gains

September has historically been a challenging month for U.S. stock markets, and the phenomenon known as the “September Effect” appears to extend to the Bitcoin market as well. In examining Bitcoin’s performance, particularly in the initial week of September, one finds evidence supporting this theory.

Numerous analyses have documented that the S&P 500 has experienced declines in September 55% of the time since 1929, marking it as the most problematic month for the index within nearly a century. Researchers attribute this trend to various factors, including the vacation schedules of traders and the fiscal calendars of financial institutions.

Although Bitcoin’s history is considerably shorter, its price movements indicate a clear pattern, with declines noted in September on eight occasions since 2013, according to data from CoinGlass. Currently, Bitcoin is witnessing a price drop exceeding 8% in September, surpassing the average decline of 5% seen over the last ten years. Since 2013, September stands as Bitcoin’s worst month, with only June registering a negative average price movement over the same period.

Despite the unfavorable trend, Jake Ostrovskis, an OTC trader from Wintermute, asserts that the significance of the “September Effect” should not be overstated. He observes that the small sample size involved in analyzing September’s performance diminishes its reliability as an indicator. For instance, Bitcoin realized nearly a 4% gain last September amid this historical backdrop. Ostrovskis emphasizes that immediate market conditions, liquidity trends, and overall market sentiment are far more critical indicators of Bitcoin’s price movements than specific calendar dates.

Further aspects concerning average returns warrant consideration. According to Zach Pandl, Managing Director of Research at Grayscale, Bitcoin’s exceptional average return of 46% in November is predominantly influenced by significant gains observed in 2013. In contrast, earlier downturns in the stock market during the 1930s have contributed to the broader perception of the September Effect.

Despite inherent skepticism surrounding the September Effect, numerous economists classify it as a perplexing anomaly with minimal relevance to current market behaviors, as noted by Investopedia. This perspective aligns with the efficient market hypothesis, which posits that asset prices invariably reflect all available information.

Notably, the price weakness that often characterizes September has historically been succeeded by substantial gains. Since 2013, the average drop of 5% in Bitcoin’s price during this month has typically been followed by an impressive 22% increase in October, further bolstered by an average 46% rise in November. The phenomenon known as “Uptober” emerged during the bullish market conditions of 2021, highlighting this potential for recovery.

In conclusion, while the continued trend of price declines in September may be noteworthy, the broader context and indicators available may serve as a more reliable basis for analysis. Investors, particularly those with a long-term view, would be prudent to emphasize improving fundamentals and potential market movements, particularly as Bitcoin navigates the transition into October, a month historically noted for its favorable returns.