Since its inception in mid-July, the Direxion Daily Crypto Industry Bear 1X Shares (REKT) has gained just over 8% and more could come if history repeats itself when it comes to the “September Effect.”
After an August 5 sell-off, the S&P 500 has largely recovered en route to its upward trajectory. Bitcoin also dipped lower, but has been trading mostly sideways for much of the year though it’s up 40% year-to-date.
September could bring volatility to both markets if prices repeat historical patterns. Looming interest rate cuts and a U.S. presidential election could also add more market intrigue for both assets through the rest of the year.
“The “September Effect” is an awaited phenomenon in the stock market, with the month having historically negative returns for investors,” noted Finbold. “Bitcoin (BTC) has seen a similar effect, with September being the worst month for returns, usually punishing cryptocurrency bulls.”
Using data compiled by CoinGlass, Finbold was able to identify price patterns for the month of September. Bitcoin, in particular, was susceptible to price declines, supporting the September Effect hypothesis further.
“Notably, in September, Bitcoin’s historical average and median monthly returns were -4.78% and -5.58%, respectively,” Finbold noted. “September and June are the only two months with negative average results, with the latter being a neutral -0.35%.”
The good news for bulls is that a bearish September doesn’t mean prices will continue declining.
Bitcoin Price data by YCharts
A Post-September Rally Brewing?
Despite prices skewing towards the downside during the month of September, it could be a necessary path to more gains for Bitcoin. Price consolidation could give way to a bullish pattern similar to that in 2020.
“In many bull markets, September has been a month of consolidation, where prices stabilize before entering a strong upward trajectory in the year’s final quarter,” a separate Finbold article confirmed. “This pattern was notably observed in 2020 when, after a turbulent September, the market experienced a remarkable rally in Q4, driven by renewed investor confidence and strong corporate earnings.”
If bullishness prevails, then traders will want to take the other side of the REKT coin with the Direxion Daily Crypto Industry Bull 2X Shares (LMBO). Using both funds allows traders to maintain flexibility in the crypto markets, which are notorious for their heavy volatility. As such, having the tools to trade upside or downside is almost imperative for crypto traders.
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