Bitcoin faces September slump as rate hike risks grow

Bitcoin has started September with a slight drop, falling 1% below $78,000 as it enters a month that has historically been its weakest. Since 2013, September has seen an average decline of around 3% for bitcoin, earning it the nickname “Rektember.”

Historical trends and current pressures

September has been bitcoin’s worst-performing month on average, with only five positive monthly returns since 2013. The past three Septembers, however, have all delivered gains, offering some hope to investors.

This year, macroeconomic factors add to the pressure. Markets are pricing in a 66% chance of a 25-basis-point Federal Reserve rate hike at the September 16 meeting, with another possible increase by year-end. Higher interest rates typically weigh on risk assets like bitcoin by tightening financial conditions and strengthening the U.S. dollar.

Broader market context

Bitcoin is not alone in facing headwinds. Gold fell more than 2% on Tuesday, while U.S. strikes against Iran pushed oil prices to $88 a barrel, their highest since late July. Traditional markets also struggle in September, with the S&P 500 historically generating negative average returns during the month since 1975.

Fed Chair Kevin Warsh’s recent hawkish comments on inflation have contributed to a global bond sell-off, with the U.S. 10-year Treasury yield rising to 4.784%.

What is confirmed

• Bitcoin fell 1% below $78,000 at the start of September.
• September has been bitcoin’s worst-performing month on average since 2013, with an average decline of around 3%.
• Markets are pricing in a 66% probability of a Fed rate hike on September 16.
• The U.S. 10-year Treasury yield rose to 4.784%.
• Gold fell more than 2%, and oil prices reached $88 a barrel.

Why this matters

Historical trends and current macroeconomic pressures suggest bitcoin could face a challenging month. Higher interest rates and a stronger dollar often reduce demand for risk assets, including cryptocurrencies.

Sources

• CoinDesk