Can Grayscale’s victory help Bitcoin break free from the September curse?

Source: The Block

Translation: LianGuaiBitpushNews Mary Liu

Bitcoin has historically performed poorly in September.

The recent victory for Grayscale in the ETF case is unlikely to prevent Bitcoin from ending August with a negative rate of return. In early August, BTC was above $29,000, but now it is hovering above $27,000.

The performance in August has brought uncertainty to the upcoming September. The characteristics of August were historically low volatility, decreased trading volume, and a flash crash that led to the BTC price dropping to the $25,000 region.

James Butterfill, the Research Director at CoinShares, said that the price drop in August “highlighted the vulnerability of Bitcoin in larger trades, and the current low trading volume exacerbates this vulnerability.”

Butterfill predicts that the market will still be dominated by volatility in early September. He expects traders to oscillate between excitement over ETF approval and skepticism about SEC approval. Despite the favorable ruling for Grayscale from the court on Wednesday, Butterfill told The Block, “It is unlikely to accelerate the timeline for SEC approval as there is still a possibility of appeal.”

Strong US Dollar Suppresses Risk Assets

In a recent report, Butterfill questioned whether the market conditions in September can sustain Bitcoin’s current value. The key to his evaluation is “the rise in the US dollar index, which affects the entire risk asset.”

After more hawkish comments from the Federal Reserve last Friday, the US dollar has strengthened recently. A stronger US dollar will reduce the risk-adjusted returns associated with Bitcoin, making digital assets less popular.

Butterfill also pointed out that the trading volume of Bitcoin is lower than the same period last year, which is a negative signal. He added, “This is not just a seasonal effect.” According to researchers, the average daily trading volume of Bitcoin was $7.5 billion last summer, while it is $4 billion this summer.

Butterfill explained that multiple factors have contributed to the current inactivity of digital assets. On-chain data shows that investors are in a holding state, waiting for the SEC’s decision on approving a US spot ETF. He emphasized that recent regulatory crackdowns have affected trading volumes in the US. He also noted that Binance’s fee promotion activity “from March 2022 to March 2023 resulted in a sharp decline in trading volume.”

September Brings Market Uncertainty

Historically, Bitcoin has performed poorly in September.

Eric Crown from Krown Trading posted on X (formerly Twitter), “Of the 13 previous Septembers, 9 had negative returns from open to close, with an average loss of -12.80%.”

Therefore, investors remain vigilant about additional downward pressure.

An analyst expects trading volume and volatility to increase in September. YouHodler risk manager Sergei Gorev told The Block: “We expect the volatility in September not to be as low as in August.” He added that with the end of the U.S. fiscal year next month, traders will liquidate more positions.

Gorev added: “The fact that fixed general portfolio profits may affect cryptocurrency sales, especially in September, could lead to negative dynamics in the cryptocurrency market.”

James Butterfill emphasizes that September is “a period when fund managers allocate after the end of the holidays, and hawkish rhetoric may affect their investment decisions.”

However, Butterfill has a more optimistic outlook for Bitcoin in October and November. He said, “I suspect that as macro data deteriorates, central banks may start turning soon. This will be more favorable for Bitcoin. However, timing is tricky, and we may have to wait until October and November to see this happen.”

According to CoinGecko data, as of Wednesday’s closing of the U.S. stock market, Bitcoin’s 24-hour volatility was less than 2%, with a trading price of $27,258.65.

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