Bitcoin Breaks Away from Traditional September Slump
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| By Marija Matic |
I’m sure you’ve heard the saying “March comes in like a lion and out like a lamb,” referring to how the harshness of winter usually melts into the peace of spring in those 31 days.
Usually, the same is true for September … when it comes to price action in crypto.
This year, however, Bitcoin (BTC, “A-”) has shown impressive resilience in the face of several macroeconomic events.
Just last week, the Federal Reserve’s decision not to raise interest rates for the quarter coupled with a hawkish message, as well as the delay in the Mt. Gox creditor’s payout both played a pivotal role in sending BTC down 4%.
But 4% isn’t a very large drop, especially not for crypto. And Bitcoin is still up 0.77% for the month.
So, while September has been lackluster overall, Bitcoin’s stability in a usually disappointing month is notable.
However, September isn’t over yet, and the road ahead is laden with potential challenges. The first we’ll face will be the release of U.S. gross domestic product figures later this week, which are poised to influence market dynamics.
All Eyes on DXY and Volatility
Greater than the specific macroeconomic that lie ahead, however, is the fact that there has been a dramatic drop in the average correlation coefficient between Bitcoin and the U.S. Dollar Index.
Indeed, it’s reached its lowest point in the past year.
The trend indicates a strengthening inverse relationship between these two assets. So as one goes up, the other goes down.
The implication is that traders are now placing greater emphasis on monitoring DXY's performance and macro narratives when making decisions related to Bitcoin, underlining the growing significance of their influence on BTC movements.
Simultaneously, Bitcoin is experiencing one of its least volatile periods in recent history, which typically suggests that strong volatility is just around the corner.
Key Levels
In the anticipation of this potential volatility, Bitcoin failed to confidently breach and maintain its position above descending resistance in the face of last week’s challenges:
This rejection signals a continuation of short-term bearish sentiment with $26,400 acting as a local resistance.
Ethereum (ETH, “B”) faced a similar fate. It was also rejected at its descending resistance, coinciding with the crucial $1,660 level.
ETH remains locally bearish until it can establish a foothold above this level, a critical requirement for bullish momentum to materialize.
Notable News, Notes & Tweets
- Arbitrum (ARB, Not Yet Rated), a major Layer-2 scaling solution for the Ethereum blockchain, has officially added $56 million of the unclaimed tokens from its airdrop to its treasury.
- FTX files a $157 million lawsuit against ex-employees for using their connections to pull their money out first when FTX's stability was in question.
- Coinbase CLO Paul Grewal does not rule out the prospect of a new token for their Layer-2 base network.
- Tether (USDT) makes strategic investment into Northern Data Group, which is set to become the biggest independent AI player in Europe.
What’s Next
Surprisingly, there is an evident regional disparity in sentiment between European and U.S. traders.
While European crypto investment products saw $16 million in inflows, their U.S. counterparts witnessed $14 million in outflows.
This regional divergence is attributed to uncertainties surrounding crypto regulations in the USA, exacerbated by recent actions taken by the U.S. Securities and Exchange Commission against crypto companies.
That could change soon, as the next opportunity for the SEC to grant approval for a spot Bitcoin exchange-traded fund is coming up in October.
An analogy is often drawn to the approval of the first gold ETF in 2003, which catapulted gold prices by over 300% in the ensuing years.
Meanwhile, on-chain data reveals that most long-term Bitcoin holders remain in a profitable position and have yet to divest their holdings in 2023. This suggests their anticipation of a higher Bitcoin price in the future.
Some in fact view the ongoing flat trend as an opportunity, gearing up for the anticipated Bitcoin halving by mid-2024. Historical precedent shows that previous halving events have acted as bullish catalysts, often preceded by periods of market stagnation.
In short, if you’re long-term bullish on Bitcoin and other crypto blue chips, this lull in volatility is a buying opportunity.
And for those looking at a shorter timeframe, the upcoming monthly close should bring a clearer picture of the next short-term trend.
But if timing the markets this way isn’t for you, I suggest you learn more about other ways to invest in crypto, like yield farming.
My colleague Chris Coney’s 2023 DeFi MasterClass not only breaks down how yield farming works, it also walks you through the entire process from setting up your wallet to identifying the most promising yield opportunities that can earn as much as 39x what the average money market account offers.
And if you sign up before this Thursday, Sept. 28, you’ll be able to join Chris for a LIVE event at 2 p.m. Eastern where he’ll break down the current market and answer all your pressing DeFi and yield farming questions.
The event is only for those enrolled in the 2023 DeFi MasterClass, however. So, if you’re interested in learning more, click here.
Best,
Marija
