Why Are Septembers So Terrible?

Thoughts on seasonality and the outlook for the rest of the year.

Septembers are terrible.

Since bitcoin started trading in 2010, the asset has fallen 4.5% on average during September. That’s by far the worst month, and one of only two months with a negative average return.

Bitcoin’s Average Returns by Month, 2010-2024

Source: Bitwise Asset Management with data from Glassnode and ETC Group. Data from August 2010 to September 2024.

Things don’t get better when you look more closely. As a detailed analysis from NYDIG shows, bitcoin has traded down in nine of 13 Septembers on record. September 2011 was its worst month ever, with a fall of 41.2%. So far this month, through Sunday, bitcoin is down 7%.

As the Green Day song goes, ”Wake me up when September ends.”

What Drives the September Effect?

There is a lot of discussion about what drives the September Effect. While none of it is particularly convincing, I’ve found three primary theories:

1. Septembers Are Terrible for All Risk Assets

Bitcoin is not the only asset that suffers from the back-to-school blues. Since 1929, September is the only month when stocks fall more often than they rise. This effect is particularly pronounced in the tech-heavy Nasdaq-100.

Economists have tried to attribute this to various factors—a bump in volatility after the slow summer months, mutual funds harvesting losses at the end of their fiscal year—but no one is quite sure.

Whatever the reason, it’s happening again: Through Friday, September 6, the Nasdaq-100 is down almost 6% this month.

Nasdaq-100 Average Monthly Gain

Source: ChartoftheDay.com. Data from January 1985 to December 2023.

2. SEC Enforcement Season Weighs on Crypto:

The SEC runs on an October-September calendar year. Historically, that means you tend to see lots of enforcement actions in September, as lawyers try to meet their quotas for the year.¹ True to form, SEC enforcement season is heating up: We’ve already seen a meaningful settlement with crypto fund provider Galois Capital as well as a Wells notice against NFT platform OpenSea this month. Many predict more significant lawsuits and settlements against crypto entities by month’s end. I wouldn’t be surprised; I’ve been hearing rumors of larger enforcement actions since early summer, and we’ve long warned about the perils of SEC enforcement season.

I’m not sure the SEC overhang is enough to explain the September Effect on its own, but it certainly doesn’t help.

3. Reflexivity

Probably the best explanation I’ve heard for the September Effect is that it’s simply self-reinforcing: People now expect September to be bad, and so it is. While that might not sound earth-shattering, it’s no less true: Expectations move markets.

By contrast, bitcoin investors historically love October—it’s nicknamed “Uptober,” after all, thanks to bitcoin’s 30% average rise during the month. That probably juices the animal spirits. October and November are historically among the best months for crypto investors.

The Outlook

Like many, I’m not quite sure what to make of the September Effect. It’s unclear to what extent the factors above matter, whether it's a pure anomaly, or if there are various forces at work that have not been excavated. Regardless, it’s impacting the psychology of today’s market.

Here’s what I do know: Seasonality aside, what’s most important is looking at the particulars of the market right now. And when I do that, I begin to see what’s behind crypto’s softness this September.

Markets hate uncertainty, and there is a lot of uncertainty in the market right now. Consider: 

• The U.S. presidential election—which will have significant ramifications for crypto—is currently a toss-up, with odds splitting different ways depending on whether you look at Polymarket, PredictIt, or 538. I suspect we’ll see the market struggle to find its footing until we have greater clarity over future leadership and policy. 

• The timing and scale of Fed rate cuts is spurring fierce debate. While there’s broad consensus that easier money is coming, investors are feverishly recalibrating their bets: The probability of a 50 bps rate cut in September is down, but the probability of more than 125 bps in cuts by December is up.  

• ETF flows paint a mixed picture. While flows into Bitcoin and Ethereum ETFs have softened—U.S. bitcoin ETFs just saw their longest run of net outflows since launching in January—zoom out and you see something else: Investment advisors are adopting bitcoin ETFs faster than any new ETF in history.

My base case remains that we see a significant rally as this uncertainty starts to dissipate in October and November. The fact that this aligns with historical trends may or may not be a coincidence. Either way, I’m ready for it.

Notes:

(1) If you don’t believe me that this is a thing, check out the press release the SEC puts out at the end of enforcement season announcing its results. It’s the closest thing to an “earnings report” that I’ve seen from any government agency.

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