The run of volatile Septembers continues as the cryptocurrency market suffers another crash – its second in two weeks.
On September 21, Bitcoin dipped to $39,787.61 – its lowest price since the start of August. Ethereum has seen similar drops in price, having dropped below $3000, and going as low as $2676.41 (via CoinMarketCap).
But is this anything new?
The September Effect?
The September Effect is a disputed term used to explain poor stock market performance in September, a trend that may also be seen in the cryptocurrency market.
Since 2011, six of the ten Septembers have seen negative bitcoin returns. Bitcoin’s last September price increase took place in 2016 (via Bitcoin Monthly Return).
Cryptocurrency traders such as Michaël van de Poppe have noted historical volatility in September to suggest holders should ‘buy the dip’ ahead of a Q4 bull run.
Looking ahead to Q4 2021, Bitcoin will receive its Bitcoin Taproot upgrade, described by Kraken as one of the cryptocurrency's most significant upgrades in recent years.
There are several potential explanations for the September Effect. These include the end of the summer period, or that it is simply a case of market psychology anticipating the September Effect.
However, as Investopedia explains, the theory is most likely a pattern rather than having a causal relationship to the market.
Instead, it is likely easier to point towards El Salvador’s adoption of Bitcoin as a legal tender, and the potential Evergrande collapse, as explanations for September 2021’s volatility in the cryptocurrency market.
At the time of writing, Bitcoin and Ethereum are priced at 42,354.37 and $2931.95, respectively.