Bitcoin’s September Selloff Continues Ahead of US Presidential Election Breakout
Cryptocurrency Prices Dipped Sharply on Monday
The cryptocurrency market experienced a sharp decline on Monday, with Bitcoin (BTC) falling 3.7% over the past 24 hours. Other major altcoins, including XRP, ADA, DOT, and LINK, plummeted by more than 5%. However, SOL and ETH outperformed, with only 1.9% and 2.8% declines respectively.
BTC’s Positive Return in September
Despite the decline, Bitcoin is on track to finish September with a nearly 7% return, its best performance since 2013. This positive return could bode well for October, as every previous green September has been followed by more gains the next month. October is also historically one of the strongest months for bitcoin, earning its nickname ‘Uptober’, by recording positive monthly returns 9 times out of 11 since 2013.
Crypto-Related Stocks Also Took a Hit
Crypto-related stocks also experienced significant declines, with multiple bitcoin miners including Marathon Digital (MARA), Bitdeer (BTDR), Hut 8 (HUT) and CleanSpark (CLSK) plummeting 5%-10%. Coinbase (COIN) fell over 6%, while MicroStrategy (MSTR) was more than 3% lower shortly before the close of trade.
Traditional Markets Showed Similar Declines
U.S. equity indexes were flatlined for most of the day before heading lower towards the later hours of the session, while key European markets sold off 1%-2%. Japan’s incoming prime minister Shigeru Ishiba stated that "monetary policy must remain accommodative as a trend", according to a Reuters report.
Federal Reserve Chair Jerome Powell’s Comments
Federal Reserve Chair Jerome Powell tempered expectations on Monday that future rate cuts will be as aggressive as September’s 50 basis point cut. He stated, "Looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral stance. But we are not on any preset course." The risks are two-sided, and we will continue to make our decisions meeting by meeting."
When Might Bitcoin Truly Break Out?
Even with today’s dip in crypto prices, bitcoin is on track to finish with a solid positive return in September despite its reputation for being an adverse month. BTC was up just shy of 7% through the month at prices a few hours before UTC midnight, booking its best September performance since 2013.
October’s Potential for a Strong Rally
October is historically one of the strongest months for bitcoin, earning its nickname ‘Uptober’, by recording positive monthly returns 9 times out of 11 since 2013. However, Charlie Morris, founder of investment manager ByteTree, contemplated whether the expectation of a strong October is so widespread that it may throw a curveball to investors.
Contrarian Perspective on Expectations for October
Morris noted that "The contrarian will always be cautious of an idea that has become too popular because popularity means the money is already invested ahead of the event." He further stated that BTC’s price historically consolidates for roughly six months after halvings before making new highs, and the current price action is in line with that pattern.
Patterns Suggest a Breakout to New Highs by Late October
Given that this year’s event happened on April 19, a breakout to new highs may happen towards the end of October if the pattern holds up. Options traders, however, expect that a bigger rally will only come after the U.S. elections in November, and are thus positioning for further weakness in the coming weeks.
Market Positioning for Further Weakness
Jake Ostrovskis, OTC trader at crypto market maker Wintermute, stated, "With spot trading dipping below $65,000, the volatility surface indicates a bias toward the downside until late October and November, when the market begins to favor calls over put protection." He further noted that current positioning suggests support for a post-election rally.
Conclusion
The cryptocurrency market experienced a sharp decline on Monday, with BTC falling 3.7% over the past 24 hours. However, despite the decline, Bitcoin is on track to finish September with a nearly 7% return, its best performance since 2013. The expectation for a strong October may have become too popular, and investors should be cautious of this trend. The market positioning suggests further weakness in the coming weeks, but a breakout to new highs may happen towards the end of October if the pattern holds up.
