Analysts said October could potentially be bullish for Bitcoin after a near-term price dip in September

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Since the start of September, the crypto market has faced a significant downturn. This drop is largely driven by Bitcoin’s fall below $55K, aligning with the weak performance of financial markets during the month. This recurring trend of market declines in September is often referred to as the September Effect.

What Is the September Effect?

According to Investopedia, Historically, September has consistently shown poor stock market returns, making it the worst-performing month on average for nearly the past century. The September Effect refers to a market anomaly tied to the calendar, where no specific event or cause explains the trend, which contradicts the efficient markets hypothesis (EMH). Although statistical evidence for this effect varies depending on the period studied, much of the reasoning behind it is anecdotal. Interestingly, in recent years, September has shown a positive median return.

September has been the stock market’s least profitable month. According to a report from Open Markets, the S&P 500 index has fallen by 55% since 1929, making it the poorest performing month compared to others. One possible explanation for this drop is that it aligns with traders’ holidays and the fiscal year-end for several financial institutions.

Over the last decade, Bitcoin has often seen a decline in September following the decline in the stock market in the US.

Especially in the last few years, Bitcoin movements have closely mirrored stock market movements in the US, this is because most of the liquidity currently comes from there and this is also the reason why the Fed’s decision on interest rates is highly anticipated by the market.

According to data from CoinGlass, Bitcoin has posted negative returns in nine out of the years since 2013, with positive returns only seen in 2015, 2016, and 2023. Notably, September had the highest average loss at -4.96%, followed by June with an average decline of -0.3%.

The data indicates that September typically experiences the largest average decline, with losses reaching -4.96%, while June follows with an average loss of about 0.3%. At present, Bitcoin’s average loss is recorded at -7%.

Suffers in September but Rises in “Uptober”

If we look at the Bitcoin seasonality table above, October has always been a momentum for Bitcoin’s rise. And during the last 2 Halving cycles, Bitcoin has consistently increased 160 days after halving, interestingly coinciding with the month of October.

Zach Pandl, managing director of research at Grayscale, highlighted the importance of analyzing average returns while accounting for outliers.

For instance, Bitcoin saw an average return of 46% in November, largely driven by a 449% price jump in 2013. Similarly, the S&P 500’s weak performance in the 1930s contributed to what is known as the September Effect in the stock market.

Pandl further noted that October has historically posted the highest returns, with data showing that Bitcoin’s typical September losses are often followed by notable gains in the following months.

Since 2013, Bitcoin has seen an average drop of 5% in September, often followed by an October rise of up to 22% and a November surge of as much as 46%, a trend referred to as “Uptober.”

“We anticipate that only the most impatient traders will react to the September Effect, while most investors will focus on Bitcoin’s improving fundamentals, such as potential Fed rate cuts and growing institutional adoption,” Pandl remarked.

Conclusion

In summary, the September Effect has historically impacted both stock markets and Bitcoin, often resulting in price declines during the month. This pattern is particularly visible in Bitcoin’s performance, with average losses of around 5% in September since 2013. Despite these losses, analysts suggest that October, or “Uptober,”could be bullish for Bitcoin, with an average rise of up to 22% historically. Factors such as improving Bitcoin fundamentals, potential Fed rate cuts, and increasing institutional interest contribute to the expectation of a rebound in the coming months. While short-term traders may react to September’s downturn, long-term investors are likely to focus on the more positive outlook ahead.