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PrimeXBT Research: September historically red for bitcoin, here’s why this time could be different

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PrimeXBT Research

Bitcoin price has been on a steady climb since the market-wide Black Thursday collapse in mid-March 2020.

The first ever cryptocurrency has since been positioned as a hedge against inflation, a digital replacement for gold, and the best performing mainstream finance asset of the year.

But since the turn of the month from August to September, the cryptocurrency has been crashing, causing a sharp change in sentiment from greed to fear across the market.

Whether it is ‘end of summer blues’ or due to emotions flying high as people go back to work or school, nearly all past Septembers in Bitcoin have led to downside. Will the leading cryptocurrency by market cap continue to decline throughout the month, or is this time different?

All Markets Are Cyclical, Key Dates Proven To Repeat And Recur

Financial markets are said to be cyclical, with key dates that often repeat. It has led to the creation of common sayings like “sell in May and go away,” in reference to normally abysmal performance throughout the summer months. This summer, however, saw equities soaring, gold reach a new record, and Bitcoin surge past $10,000. Selling in May, would have caused investors to miss out on substantial gains.

Looking back at past monthly price history, however, no month has proven more deadly for Bitcoin than the month of September.

Each September over the last four years has resulted in a $2,000 or more plunge, and within the first week of September 2020, the story has been no different.

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A deeper dive backward throughout Bitcoin’s just over a decade of price history shows that out of eleven years worth of Septembers, only three were green. Only one of the three green September closes were anything of note.

Dating back to the furthest possible green monthly close, Bitcoin climbed just under 29% in September 2012.

2015 and 2016 both saw green September closes also, but with just a 5% and 10% rise during these months, they are nothing in comparison to the months of September with significant downside.

Averaging out all eleven years of September price action, still leads to an average 20% decline even with three positive months included in the data.

Interestingly, Bitcoin price has fallen exactly 20% – the eleven year average decline – in September 2020. Could this mean that the fall is already over, and a reversal to new highs is possible? Or has in the past September led to more downside in the months following?

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Will This Month In Crypto Be A September To Remember?

Only three September closes led to more selling in the months ahead. All other instances resulted in a massive rally and new highs. But what is it about September that has results in the corrective price action at the close of each summer?

In 2012, 2016, and again this year, September is the month when the upcoming presidential campaigns in the United States get more serious leading up to election day in November.

It is considered the campaign home stretch for Republican and Democratic candidates. With Trump in office and Biden the front-runner to take his spot, markets are especially fearful this September heading into the end of the year.

But 2012, and 2016 were among Bitcoin’s rare green Septembers, so while there is added uncertainty due to the upcoming election, it still doesn’t explain why Bitcoin sellers are so ferocious in the first month of the fall season.

Another theory involves Bitcoin fundamentals. According to reports, the rainy season in China ends in September. Increased rain throughout the summer months in the region helps keep electricity prices low. Cheap electricity means lower cost hash rate put forth toward mining more BTC. It also explains why Bitcoin miners were seen moving an “usually large sum” of BTC ahead of the recent market crash.

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When the rain dries up, so does cheap electricity, and miners are suddenly forced to sell more Bitcoin supply to cover the loss in revenue. Miners selling large sums of Bitcoin can have a dramatic impact on asset valuations. It was miners capitulating in late November 2018 that was said to take Bitcoin to its bear market bottom.

Miners are once again in trouble, but prices are vastly different. Although Bitcoin price is much higher than it was in late 2018, the cost of producing each BTC is double what it once was, due to the asset’s hard-coded halving.

The halving took place this past May and reduced the block reward miners receive from 12.5 BTC to just 6.25 BTC.

However, the cost in electricity or other means to mine each block remains the same. This puts Bitcoin in a dangerous position, where if miner revenue drops too low, a massive sell off could follow. At the same time, Bitcoin is also showing a clear breakout from a multi-year triangle that suggests a new uptrend is building, and a new bull run may be close.

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Why This Time Is Different: Prepare With PrimeXBT

How Bitcoin performs following this already red September, will be telling about what’s to come for the rest of the year. A deeper correction, could lead the cryptocurrency back into a bear market for the foreseeable future under a Biden presidency. A Trump win could lead to yet another pump, much like Bitcoin did when he first took office in 2016.

After that, Bitcoin rose from $1,000 to $20,000. A similar rise would take prices to over $100,000 per BTC, making it one of the most profitable and appealing investments and trading assets available today. Some expert Bitcoin price predictions reach even higher for targets.

Bitcoin recently broke out of a textbook symmetrical triangle pattern, that last time around kicked off the historic bull run that put the cryptocurrency on the map and made it a household name. If the breakout is confirmed and support holds, this September’s crash is nothing more than a bullish retest.

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Traders can prepare for the upcoming storm, whichever way Bitcoin turns this September, by taking advantage of PrimeXBT’s award-winning trading tools. The advanced trading platform offers technical analysis software, long and short positions, and stop loss protection to keep traders one step ahead of markets, and on the right side of making money.

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