Bitcoin could have a tough September - Here's why
The summer of 2022 just ended was a tough one for cryptocurrencies, but unfortunately, there are signs pointing to an even worse September for Bitcoin and other digital assets, if seasonality and other factors are any indication.
Indeed, September has historically been one of the worst months of the year for Bitcoin, with the cryptocurrency posting a bearish record on that month every year since 2017. On average, the cryptocurrency has actually lost 8.5% over the last 5 months of September.
Seasonality and correlations not favorable to Bitcoin in September
"September is probably going to be another pretty volatile month," Shawn Cruz, head of trading strategy at TD Ameritrade, said in an interview. "The risk is on the downside," he added.
Recall that the cryptocurrency market has been challenged since the beginning of the year in the face of rising central bank rates, led by the US Federal Reserve. The BTC has indeed shown a drop of more than 50% since the beginning of the year, and other crypto-currencies have lost much more.
There has also been a growing correlation between Bitcoin and U.S. stocks, especially technology stocks, since the beginning of the year. Now, as is the case with Bitcoin, September is historically a bad month for US stocks, and there is little chance that this year will diverge, given the current environment of high inflation and recession fears.
Thus, in addition to its own seasonality, Bitcoin may suffer this month from its correlation with U.S. technology stocks, although it should be noted that not all analysts have a bearish view on BTC.
Bitcoin's fate in September will ultimately depend on the Fed
The next key event for both US equities and Bitcoin will be the upcoming Fed meeting on September 21. In fact, this Fed meeting will be decisive for Bitcoin's ability to end the month higher, or on the contrary to confirm its historical trend of falling in September.
Consensus currently anticipates a more than 70% probability of the Fed raising rates by 0.75% for the third time in a row, which could penalize the cryptocurrency, especially if the Fed adds to this sharp rate hike a verbal commitment to maintain a strongly hawkish monetary policy until inflation is brought under control.
To a lesser extent, it should be noted that next week's ECB meeting could also have an influence on the Bitcoin price. Since last weekend, expectations for this meeting have risen, so that the market is now expecting the ECB to raise rates by 0.75% as well.
In the case of both the Fed and the ECB, it should be noted that a rate hike of only 0.50% would therefore be a dovish surprise in the face of which it will probably be worth buying Bitcoin. Note that the cryptocurrency could also rise if the central banks raise rates by 0.75%, but that they link this decision to a commitment to slow down the rate hike from there.
What does the chart evidence say?
Crossing this trend line, currently located around $25,000, is from a charting perspective the first condition that needs to be met in order to have any hope of a sustained uptrend for Bitcoin.
But before that happens, BTC will also have to clear another key hurdle, the 100-day moving average, currently located at around $23,200. To sum up, the chart analysis thus tends to confirm the prospect of a difficult September for Bitcoin.
If the crypto-currency indeed fails to hold above $20,000 and deepens its losses, it is this year's low, around $17,600, that will be the key threshold to watch. Below that, there will be little potential support before the psychologically important $15,000 threshold
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