Source: Coinglass

Seasonality in financial markets refers to the recurring patterns we see in asset performance during certain times of the year. In Bitcoin’s case, the late summer months, particularly August and September, consistently show weaker performance. With median returns of -8.38% in August and -8.88% in September, these months often experience increased selling pressure. This trend is largely due to miners needing to sell more of their Bitcoin to cover higher electricity costs in the summer. This year, the market was also affected by the oversupply from the Mt. Gox distribution, adding to the downward pressure.

This seasonal weakness isn’t limited to Bitcoin. Because of Bitcoin’s significant influence on the broader cryptocurrency market, altcoins often follow suit, facing similar or even sharper declines. These assets, which are generally more volatile and less liquid, are particularly vulnerable during these periods, leading to larger losses across the crypto space.

Source: Coinglass

However, October tends to bring a change in fortunes. Historically, October has been one of the best months for Bitcoin, with average returns of +8.81% and a median of +8.90%. This month often signals the start of a year-end rally, driven by increased market activity and strategic moves by institutional investors. As a result, October is a key month for those looking to take advantage of the market’s seasonal patterns.

Resilience Amidst Turbulence: A Closer Look at Bitcoin Spot ETF Flows

During the recent market turbulence, Bitcoin Spot ETF holders have shown considerable resilience. Despite the price decline on August 1st—the worst daily drop since Bitcoin Spot ETFs began trading—the overall outflows were relatively modest, and some issuers, such as Blackrock’s  IBIT, even recorded positive net inflows.

Bitcoin Spot ETF Flows

The data from Coinglass reveals that the outflow from Bitcoin Spot ETFs was not as severe as one might expect under such volatile conditions. Remarkably, BlackRock’s IBIT ETF even recorded a net inflow during this period, highlighting the confidence of investors who, instead of pulling back, chose to increase their exposure to Bitcoin.

This behavior points to a level of maturity among Bitcoin ETF investors, who seem less influenced by short-term market fluctuations and possess a deeper understanding of Bitcoin’s pricing dynamics and the broader factors driving its value. Despite the turbulence, their conviction in Bitcoin as a long-term investment remains intact. The relatively modest outflows, coupled with positive inflows for key ETFs, suggest that these investors are not only holding their positions but also viewing market dips as strategic buying opportunities rather than reasons to exit.

Fed’s Dilemma: Could Rate Cuts Propel or Plunge Bitcoin?

Source: FedWatch

As the Fed’s next meeting approaches, markets are closely watching the possibility of a rate cut. With a 64.5% probability of a 50 basis point cut versus a 35.5% chance of a 25 basis point cut, Bitcoin investors are on alert. Historically, rate cuts have been a key catalyst for Bitcoin’s upward momentum. Lower interest rates reduce the opportunity cost of holding non-yielding assets like Bitcoin, prompting investors to seek out riskier assets as they chase higher returns.

Source: TradingView

The charts suggest that the current calmness in Bitcoin pricing might be a prelude to another fluctuating period, particularly if the Fed proceeds with a cut due to easing inflationary pressures. Should the Fed opt for a 50 basis point cut, the likelihood of Bitcoin pushing towards new highs could increase, driven by a renewed appetite for risk assets.

The underlying reason for the Fed’s decision will be critical. If the rate cut is driven by concerns over economic weakness, the market may respond with heightened volatility. Bitcoin could initially see a rally, but this may swiftly reverse into a sharp downturn as broader economic anxieties take center stage.

FiCAS research team is glad to see the events above and these are in tact with our investment approaches.

Disclaimer: This content is for educational and informational purposes only and does not constitute trading, legal, or investment advice. It is directed at our followers in Switzerland and may not represent the views of FiCAS. The author may hold assets mentioned in this article and assumes no obligation or responsibility for any actions taken based on the information provided.