Can Grayscale’s victory help Bitcoin escape the September curse?

Bitcoin has a history of underperforming in September.

Grayscale ’s recent victory in the ETF case is also unlikely to prevent Bitcoin from ending August with negative returns, with BTC trading above $29,000 at the start of August but now hovering above $27,000.

August’s performance has created uncertainty for the upcoming September. August was characterized by record low volatility, falling trading volumes, and a flash crash that sent BTC prices down to the $25,000 region.

James Butterfill, head of research at CoinShares , said the August price drop “highlights Bitcoin’s vulnerability to larger transactions, which is exacerbated by the current low trading volumes.”

Butterfill predicts that the market will remain volatile in early September. He expects traders to waver between excitement about the ETF approval and skepticism about the SEC 's approval. Despite the court ruling on Wednesday in favor of Grayscale, Butterfill told The Block that "it is unlikely that the timeline for SEC approval will be accelerated because there is still a possibility of an appeal."

Stronger dollar weighs on risk assets

In a recent report, Butterfill questioned whether market conditions in September could sustain Bitcoin’s current value. Key to his assessment was the “rising U.S. dollar index, which impacted risk assets across the board.”

The U.S. dollar has strengthened recently following more hawkish comments from the Federal Reserve on Friday. A stronger dollar index would reduce the risk-adjusted returns associated with Bitcoin, making the digital asset less popular.

Butterfill also pointed out that Bitcoin trading volume is lower than the same period last year, which is a negative sign. He added: "This is not just a seasonal effect." According to the researchers, Bitcoin trading volume averaged $7.5 billion per day last summer, while this summer it is $4 billion.

Butterfill explained that a combination of factors have led to the current inactivity in digital assets. On-chain data shows that investors are in a holding pattern, awaiting the SEC’s decision on approving a US spot ETF. He stressed that the recent regulatory crackdown has had an impact on US trading volumes. He also pointed out that Binance ’s fee promotion “began in March 2022 and ended in March 2023, causing a sharp drop in trading volumes.”

September brings market uncertainty

Based on historical trends, Bitcoin has always performed poorly in September .

Eric Crown of Krown Trading posted on X (formerly Twitter) that " 9 of the 13 months prior to September had negative open-to-close returns, with an average losing return of -12.80%."

Therefore, investors remain wary of additional downside pressure.

One analyst expects trading volume and volatility to rise in September. “We don’t expect volatility to be as low in September as it was in August,” YouHodler risk manager Sergei Gorev told The Block. He added that traders will liquidate more positions given the end of the U.S. fiscal year next month.

“The fact of fixing general portfolio profits could affect the sale of cryptocurrencies, especially in September, which could lead to negative dynamics on the cryptocurrency market,” Gorev added.

James Butterfill stressed that September is "a period when fund managers make allocations after the holidays, and hawkish rhetoric may affect their investment decisions."

However, Butterfill has a more optimistic prediction for Bitcoin in October and November. He said: "I suspect that as macro data deteriorates, central banks may start to turn around soon. This will be more favorable for Bitcoin. However, the timing is tricky, and we may have to wait until October and November to see this happen."

As of the close of U.S. stocks on Wednesday, Bitcoin’s 24-hour volatility was less than 2%, trading at $27,258.65, according to Coingecko data.