September Market Analysis
Happy Monday!
September has been a corrective month for Bitcoin, Ethereum, and the crypto markets as a whole. From a technical perspective this makes lots of sense, let’s review what’s happened since the beginning of the year.
After a spectacular 4th Quarter in 2020, Bitcoin started the year in January just above the $30,000 mark. The market rally continued it’s momentum from the end of 2020 and we saw Bitcoin pushing the $60,000 level during March and April. However, the market had run very far very fast (even by crypto standards) and needed some major cooling off. As the summer got underway, a massive correction ensued between May and June that saw Bitcoin drop over 50% to a low just under $29,000. This violent drop shook out many of the speculators, tourists, and “get-rich-quick” crowd. Over the summer we saw (and I outlined) these weak-handed market players sell their coins back to “strong-hands”, the smart money and long-term holders - and hopefully many of you!
Once this process was complete, the market was ready to resume the dominant uptrend. After holding the critical $30,000 in June and July, Bitcoin and crypto began to grind higher once again. The latter half of July and August saw Bitcoin move steadily upward, rising over 60% and briefly retaking the $50,000 level at the beginning of this month. The market needed to cool a bit once again, and September has given us a counter-trend move back down to $40,000.
Historically, this is no surprise at all. September has in fact been Bitcoin’s worst month in terms of average and median returns since the early days of crypto back in 2011. The chart below outlines Bitcoin’s historical monthly performance, average, and medians.
So far this September has seen a -8% drop. Yup, September is no good for Bitcoin! But what you might notice is that Q4 (Oct – Dec) tends to be Bitcoin’s strongest period. The next few months could be very interesting indeed.
Ethereum has followed a similar trajectory: massive surge to start the year, a significant correction over the summer, a strong rally from July-August, and now a slight corrective move. The ETH/BTC ratio continues to look constructive, which points to a likelihood (in my opinion) of continued strength in Ethereum relative to Bitcoin. As you can see from the chart below, Eth/BTC continues to trade above its 20-week moving average (red line), indicating a likely continuation of the uptrend.
Long-term investors can continue to stick to their plan and DCA (dollar-cost-average) at these levels. I believe we may see some fireworks before the end of the year.
From a fundamental perspective, the Bitcoin hash rate has recovered nicely since the sharp drop in May caused by China’s mining ban. Hash rate has rapidly returned to the highs from last year. As a reminder, the network hash-rate represents the total computing power participating in Bitcoin mining and by extension, the strength of the Bitcoin network’s collective security.
Crypto News:
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76ers Become Second NBA Team to Ink Crypto Ad Patch Deal (LEARN MORE)
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Road to Babylon Services:
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Have a great week!
Shahar
This newsletter is meant for informational purposes only. It is not meant to serve as financial advice. I have positions in several of the assets mentioned but have am not and have never been paid to promote them. This newsletter is just me sharing my thoughts and personal opinions.
