In the past five September, Bitcoin has closed the month in losses; if history repeats, it might experience similar hardships.
Bulls of Bitcoin (BTC) shouldn’t get overly optimistic just yet, as BTC is poised to enter its riskiest month since hitting a low of $17,500 in June.
The “September Effect” and Its Psychology
Except for 2015 and 2016, historical data indicates that September was the weakest month for Bitcoin between 2013 and 2021. The average monthly fall in the price of Bitcoin is a modest -6%.
It’s interesting how Bitcoin’s poor performance during the September months prior aligns with similar stock market falls. For instance, the benchmark S&P 500 for the United States has historically declined by 0.7% in September in the last 25 years.
This yearly decline is known as the “September effect” by traditional chart analysts.
Experts argue that after returning from their summer vacations in September, investors sell their market positions in order to lock gains or even tax losses before the year’s end.
In the meantime, they also point out that private investors sell off their holdings in September to cover the expense of their children’s yearly schooling.
Throughout and after the coronavirus pandemic, there has been a relatively favourable correlation between Bitcoin and the stock market. The mirroring pricing patterns may therefore raise the possibility that BTC will decline significantly in the ominous month in addition to the September effect.
So expect low volume, chop & random violent moves in either direction. The point of this post isn't to fearmonger anyone. Always a green markets somewhere. I'm sharing insight on what to expect to save newer retail traders from excruciating pain. Be patient and embrace the suck
— Seven V. Matos 🚀 (@Sevenvmx) August 22, 2022
Fed anticipates raising rates by 75 bps.
Fears of the Federal Reserve raising interest rates and ending its $120 billion monthly bond-buying plan to fight rising inflation contributed to Bitcoin’s losses in 2022.
However, expectations that inflation had peaked took over the market’s narrative. The belief grew stronger after the U.S. consumer price index (CPI) for July came in at 8.5% as opposed to 9.1% the month before, sparking rumours that the Fed will scale back its tightening intentions.
As shown below, it happened at the same time when Bitcoin and the S&P 500 both somewhat recovered from their losses for the year.
But according to a number of analysts, Bitcoin’s recovery could be a bull trap, a “relief rally” that catches investors off guard when they feel the market has bottomed.
The psychology of a relief rally 👇
Price gets just bullish enough to fool you that this rally is the real deal. 😀
There could be an end to the pain. 🙏
Then BLAMO, the market rugs you shattering your hopes. 👿😆
— Lark Davis (@TheCryptoLark) August 22, 2022
Furthermore, given their commitment to bringing inflation down to 2%, the majority of Fed officials continue to advocate hiking rates by 75 basis points at their upcoming meeting in September.
As a result, September might see Bitcoin and the S&P 500 continue their current pattern of correction, targeting new yearly lows.
Technical analysis of bitcoin predicts a decrease to $17.6K
Technically, if Bitcoin breaks out of its current “bear flag” pattern before September, it will fall toward $19,250. The four-hour chart shows an illustration of the bearish continuation scenario.
BTC has been deviating from its rising wedge pattern on the daily chart since Aug. 19. The profit target for the bearish reversal scenario is close to $17,600, as shown in the chart below.
Since 2017, every September has witnessed a decline for the biggest cryptocurrency, making it historically one of the worst months. According to Bespoke Investment Group, during the past five years, Bitcoin has typically dropped by 8.5% for the month.
The second largest token, Ether, has similarly a history of struggle; it has only increased 25% of the time and has had double-digit percentage declines on average.
Overall, according to technical, fundamental, and global reasons, September appears to have the potential to be a losing month for Bitcoin.
The author’s thoughts and opinions alone, not necessarily those of Cryptomufasa.com, are conveyed in this article. Every investing and trading action carries risk, therefore before making any moves, you should do your own research.