September: A Historically Challenging Month for Crypto
Many cryptocurrency enthusiasts look forward to the potential gains in the volatile crypto market. However, Benjamin Cowen, a prominent crypto analyst, is sounding the alarm about historical trends that could unsettle investors this September.
Understanding Historical Seasonality in Crypto
Cowen's analysis suggests that September often brings negative returns for Bitcoin (BTC). Drawing from data over several years, he notes a recurring pattern: “Whether it's 2017, 2018, 2019, or 2020, September tends to not be that great,” he explains. This notion aligns with the concept of seasonality, which refers to predictable patterns that occur at certain times of the year in financial markets.
The Role of Yield Inversions
In addition to past performance, Cowen points to another critical indicator: the inversion of the 10-year and 2-year yields. In financial markets, a 'yield curve inversion' occurs when long-term debt instruments have a lower yield than short-term debt instruments, often signaling a potential recession. Currently, these yields are nearing a point where they could 'un-invert,' a process he warns could significantly impact the market.
What Is the TOTAL3 Chart?
Cowen also examines the TOTAL3 chart, which represents the market capitalization of all crypto assets excluding Bitcoin, Ethereum (ETH), and stablecoins. He notes that the TOTAL3/BTC ratio may perform poorly in September, particularly as the Federal Reserve (Fed) is poised to cut interest rates. Historically, similar conditions have led to downturns in altcoin markets (cryptocurrencies other than Bitcoin) against Bitcoin.
Altcoin Warning Based on Historical Patterns
Cowen’s analysis further suggests that altcoin pairs, or the exchange rate between altcoins and Bitcoin, may suffer. He references the last cycle, where these pairs saw a breakdown months prior to rate cuts. Cowen warns, “We’re starting to have monthly closes below support, which historically precede rate cuts.”
Conclusion: Navigate September with Caution
For investors, these insights underscore the importance of being cautious this month. Understanding historical patterns and market indicators can be crucial in making informed decisions. As Cowen’s analysis indicates, September could be volatile for crypto markets, especially with potential policy changes from the Fed and the behavior of altcoin markets.
By keeping an eye on market trends and historical signals, investors can better navigate the potential bumps in the road that September may bring.
