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Highlights
- There is something called the ‘September Effect’ that has ailed the global stock market for the past many decades
- Cryptocurrencies also suffered losses in September last year, with the total market cap falling below US$2 trillion by the end of the month
- In the ongoing month, factors like Ethereum’s Merge and the past baggage of excessive losses in 2022 might shape the cryptoverse
A big question at the moment is how the cryptocurrency market behaved in September last year. This is because the month is notorious for being dull for investors, a phenomenon also dubbed the ‘September Effect’. Moreover, the crypto market has already proved dull this year, thanks to negative events like the collapse of Terra and the suspension of withdrawals by companies like Celsius and Voyager. What could September bring for crypto enthusiasts -- heightened worries or a little respite?
It is never easy to predict the price of any asset, let alone assets in the ultra-volatile cryptocurrency space. Bitcoin, which is often seen as the bellwether, is down nearly 60% this year, while other popular assets like Ether, Shiba Inu, and Solana are also reeling under heavy losses. Would September deepen the crisis even further?
Let us take a look at why September is considered a bad month and how cryptos behaved in September 2021.
September and stock markets
Data suggests that the ninth month of any year has historically been subdued, so much so that over the past 100 years, September largely produced negative returns. However, it is important to note that this data does not cover the cryptocurrency market, although many analysts suggest a correlation between cryptos and listed stocks.
Consider this. The S&P 500 index, which is often dubbed the bellwether of the global stock market, declined so much in one month through September 2021 that it proved to be the index’s worst month since the beginning of the COVID-19 pandemic in March 2020. In other markets, conditions was more or less the same. In Australia, for example, the benchmark ASX200 index fell 2.7% in September last year. What is a little notable is that the same ASX 200 could rise very strongly on the last day of the month, posting its strongest session in many months.
How did this September begin? Even before the beginning of this month, the global stock market was under extreme stress, thanks to incessant rate hikes by central banks. That said, the S&P 500 ended its 4-day losing streak at the last moment to finish the first day of September 2022 on a positive note.
September and cryptocurrencies
Let us take the example of last year, which was overall a good phase for the crypto industry. According to CoinMarketCap, the total market cap was just under US$2.1 trillion on 1 September 2021. By the end of the month, this figure dipped to under US$1.85 trillion. It is notable that CoinMarketCap tracks thousands of cryptoassets, nearly 21,000 as of writing, which means individual assets like Bitcoin could have behaved differently during the month.
Data provided by CoinMarketCap.com
Over the past few weeks, there has been a hype around the second-largest crypto, Ether (ETH). The fact that the Ethereum network is soon due to move to the proof-of-stake method for transaction validation has supported a volatile surge in the price of the ETH token. ETH was under US$1,000 in mid-June, but it has managed to trade over US$1,400 over the past few weeks.
Viewpoint
How September would turn out to be for the cryptocurrency space is a subject of speculation. Last year, the overall market cap fell during the month. This year, cryptoassets have already been reeling from losses. Separately, the stock market, to which the cryptoverse is sometimes compared, is also under stress, and many analysts think that the so-called September Effect might yet again spook stock investors in 2022.
There is, however, a possibility that some positive momentum might grip the cryptoverse in anticipation of Ethereum’s ‘Merge’ event, which is probably due in September. Things like the failure of TerraUSD and the bankruptcy of Voyager might have become a thing of the past. The ongoing month might spring any surprise on the crypto market.
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