The crypto market is not immune to the volatility of the global economy. The prices of cryptocurrencies are closely tied to what’s happening in the stock markets, and September is a bad month for crypto prices. People are often confused about why this is the case. It’s not just because of some arbitrary date chosen by someone who doesn’t know anything about finance.
There are a few reasons why September is a bad month for crypto prices, and they have to do with some major events that happened in September.
September Crypto Price History
September, the ninth month of the year, has historically been one of the worst for the leading cryptocurrency. According to Bespoke Investment Group, Bitcoin has typically dropped by 8.5% per month during the previous five years. Bitcoin (BTC), which has had its worst month since 2013, may fall even further in September.
Given how well cryptocurrency prices have performed so far in 2022, a drop this month would not be surprising. It includes, among other things, bitcoin and ether values. Furthermore, the value of ether has fallen by approximately 56% this year, while the value of bitcoin has fallen by approximately 58%.
According to Bespoke Investment Group experts, September has historically been a terrible month for Bitcoin and Ethereum, so seasonality is not in the asset class’s favor.
What Causes September Effect
The impact of September is not limited to the cryptocurrency market. Since 1928, the S&P 500 has mainly declined in September, dropping 1.1% on average. According to experts, the S&P and cryptocurrency prices have mostly aligned; as a result, another drop in the BTC price this month will not come as a complete surprise.
As a result, investors’ actions are to blame for the September market downturn. According to Elena Dure, many investors sell their market holdings in September to lock in profits or even tax losses as the year closes.
Furthermore, the rate of asset liquidation has increased due to the immediate need for funds to cover school expenses as the new school year begins in September. Most people believe the September effect is an excellent example of market psychology when many investors sell their coins because they believe the market will turn bearish that month.
As a result, prices fell due to this sell-off, bolstering the September effect even more.
The Situation Can Only Get Better
Despite several theories on the origin of the September effect, there is no agreement on its cause. Contrary to popular belief, the cryptocurrency market has occasionally increased throughout September. According to experts, the impact has waned recently, and the cause of crypto losses concerns Federal Reserve rate hikes.
Everyone hopes it will peak, but inflation continues to rise gradually as we approach the fourth quarter of 2022. It fell from 9.1% in July to 8.5% in August, making investors optimistic about the FED’s anti-inflationary measures.
According to experts, investors have recently reduced their risk exposure due to Federal Reserve interest rate increases. Investors are waiting for the central bank’s next move as the September policy meeting approaches. The “Merge,” an upgrade to the Ethereum blockchain, is also a significant event that will take place soon in the cryptocurrency industry.
As the Merge approaches, the price of ether may fluctuate, but some analysts believe it will eventually result in higher prices. Furthermore, just because September typically sees a drop in cryptocurrency values does not mean that trend will continue this year. However, past performance is never a guarantee of future performance in investing.
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