Wait for October to trade Bitcoin?
Wait for October to trade Bitcoin?
The Blockchain Industry: Exploring Historical Patterns and Monetary Policy Impacts
Traders in the cryptocurrency market have been patiently awaiting a breakout as the price of Bitcoin (BTC) has remained rangebound between $29,000 and $30,000. While this stagnant period cannot last forever, recent reports suggest that the market may soon experience significant price action. Ark Invest, in their report titled “Bitcoin – Breakout or Breakdown?,” points out that Bitcoin’s volatility has reached a six-year low, indicating the potential for a major price movement in either direction.
Although this observation may not come as a surprise to those closely observing the crypto markets, what traders may not be aware of is the historical price action of Bitcoin during the months of August and September, as well as the potential effects of monetary policy on cryptocurrency markets.
The Ark Invest report highlights the possibility that Federal Reserve tightening could serve as a leading indicator of price deflation. It suggests that there may be a lag associated with monetary policy, meaning that the real economy and inflation have yet to fully absorb the impact of the 300-500 basis points of tightening by the Federal Reserve. Additionally, China’s exporting of deflation adds fuel to the deflationary fire.
This lagging effect of Fed tightening is expected to coincide with Bitcoin’s halving rally in 2024-2025. If Ark Invest’s analysis is correct, the next bull run in the crypto market may be relatively tame compared to previous cycles. However, some analysts hold the opposite view, believing that the macroeconomic situation is about to become even more auspicious for Bitcoin.
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According to Morpher CEO Martin Froehler, the current macroeconomic headwinds will soon fade as the interest rate hike cycle nears its end, while the next Bitcoin halving event, approximately nine months away, historically propels the price up dramatically. Kyle DaCruz, director of digital assets product at VanEck, echoes this sentiment, stating that Bitcoin’s scarcity combined with the unprecedented growth in the money supply could lead to a continued rally.
Nevertheless, historical patterns suggest that the anticipated rally may not materialize just yet. August and September are historically the worst months for BTC price performance. Out of the 12 Augusts from 2011 to 2022, only five witnessed positive returns, with the remaining seven months in the red. September fares even worse, with just four out of 12 months seeing positive performance.
Furthermore, five out of the 12 negative Septembers saw only single-digit price decreases, a relatively small move for an asset as historically volatile as BTC/USD. On average, September records a -5% move, while August shows a modest +0.73% move. The recent flatlining of the Bitcoin price with record-low volatility further supports the historical pattern.
However, Bitcoin market observer Will Clemente counters these historical patterns by noting that all of Bitcoin’s negative performing years occurred two years after the halving event. This suggests that the worst of the bear market may already be behind us. According to Clemente’s timeline, the largest gains for Bitcoin lie ahead through 2024 and 2025.
Despite this optimistic view, the collision of a potential deflationary environment and recession forecast with the Bitcoin halving rally may pose downward pressure on the BTC price, potentially offsetting some of the gains expected in the next bull cycle.
In conclusion, the blockchain industry, with Bitcoin as its flagship cryptocurrency, continues to captivate traders and investors alike. Understanding historical price patterns and how monetary policy impacts the market is crucial for making informed decisions. While volatility remains low, the anticipation of a breakout grows stronger. Will the upcoming months adhere to historical trends, or will unforeseen factors reshape the crypto market? Only time will tell.