Why does September always see a drop? Will Bitcoin have an Uptober?

ETF issuer Bitwise's founder Matt Hougan analyzed the data and reasons behind the dismal September market in "Why September is Always Terrible," and optimistically believes that with uncertainties dissipating in October and November, a significant rebound in BTC will be seen.

Another month to endure? Historical data: Bitcoin always drops in September, rises in October

Historical Data: Bitcoin Average Down 4.5% in September

Since Bitcoin began trading in 2010, the asset has averaged a 4.5% decline in September, making it the worst-performing month, with only August and September having negative average returns in a year.

Looking at detailed data, September has seen declines in nine out of thirteen years. September 2011 was the worst month ever, with a 41.2% drop. As of the reporting cutoff date on 9/8, Bitcoin has already fallen by 7% this month.

Why Does September Always See Declines?

There are many discussions about the driving factors behind the September effect. Matt Hougan summarized three main factors:

Almost All Risk Assets Decline in September

Bitcoin is not the only asset suffering. Since 1929, September is the only month where the number of stock declines exceeds the number of increases. This effect is particularly pronounced in the tech-heavy Nasdaq 100 index.

Economists have tried to attribute it to various factors, including increased volatility following the summer lull, losses for mutual funds at the end of the fiscal year, among others, but no one can be certain of the reasons.

Regardless of the reasons, this situation is happening again: as of Friday, September 6, the Nasdaq 100 index has fallen by nearly 6% this month.

SEC Enforcement Season Pressures Cryptocurrencies

The SEC operates from October to September each year. Historically, this means a lot of enforcement actions are seen in September as the SEC tries to meet its year-end performance. Many predict that by the end of September, lawsuits and settlements against cryptocurrency entities will be more significant.

SEC crypto fines nearly $5 billion in 2024, up 3,018% from last year

Psychological Expectations of People

Hougan believes the most reasonable explanation might be that it's just a self-fulfilling psychological effect! Because people now expect September to be bad, and such expectations drive the market.

Will Bitcoin See Uptober?

In contrast, Bitcoin investors have historically favored October, dubbed as "Uptober," thanks to an average 30% increase in that month. Historically, October and November are among the best months for cryptocurrency investors.

Hougan believes that, in addition to seasonal factors, the most important thing is to pay attention to the specific situation in the current market, with many uncertainties still existing, including:

• The U.S. presidential election will have a significant impact on cryptocurrencies, which is currently unpredictable
• The timing and scale of the Fed's rate cuts have sparked intense debate. While there is a general belief that loose funds are coming, investors are fervently readjusting their bets: the likelihood of a 50-basis-point cut in September has decreased, but the possibility of a cumulative cut of over 125 basis points by December has increased
• ETF fund flows are mixed. While funds flowing into Bitcoin and Ethereum ETFs have been weak, investment advisors are adopting Bitcoin ETFs at a pace faster than any new ETF in history

And Hougan still believes that as uncertainties dissipate in October and November, we will see a significant rebound, which may be just a coincidence with historical trends, but he is prepared for it.