As we approach September 2024, many investors are wary of Bitcoin's historical performance during this month, which has traditionally been one of the weakest periods for the cryptocurrency. However, despite these historical trends, several factors suggest that this September may not follow the usual pattern. This analysis will explore why Bitcoin's price may not necessarily decline in the coming month, considering historical data, the clearing of strong selling forces, the strength of long-term holders, a potential renewed buying force from Bitcoin ETFs, and favorable socioeconomic conditions.

1. Historical Context and September's Reputation

Historically, September has been a challenging month for Bitcoin, with an average negative return of 4.78% and a 72.7% chance of closing the month in the red. This pattern, coupled with a disappointing performance in August 2024, might lead some investors to brace for another rough month. However, a closer examination reveals that while September often shows negative returns, this is not always the case. In fact, out of seven years where August ended negatively, September only continued the downward trend four times (57.1%), while three times (42.9%) it showed positive returns. This data suggests that while September's reputation is justified, it does not guarantee a negative outcome for Bitcoin, leaving room for optimism.

Fig 1. Bitcoin Monthly Returns since 2013.

2. Clearing of Strong Selling Forces

One of the most significant factors that could support Bitcoin's price in September is the clearing of major selling pressures that occurred in July and August 2024. Several key events contributed to this:

2.1. The German Government's Bitcoin Sales

In January 2024, the German government seized around 50,000 BTC from the Movie2k piracy site. Between June and July 2024, nearly all of these Bitcoins were sold, totaling 49,859 BTC ($3 billion). This massive sell-off contributed to the price declines seen over the summer. However, with most of these Bitcoins now off the market, the selling pressure from this source has significantly diminished, reducing the likelihood of a similar impact in September.

Fig 2. German government allegedly dumped 49,859 BTC ($3 billion) in June and July.

2.2. Mt. Gox Repayments

Mt. Gox, the defunct Japanese Bitcoin exchange, announced in June 2024 that it would begin repaying creditors in early July. Since then, 95,958 BTC ($6.07 billion) have been transferred to exchanges and custody wallets for repayments. With only 44,898 BTC ($2.65 billion) left, or around one-third of the initial holding, to be distributed, the bulk of these repayments—and the associated selling pressure—has likely passed, lessening the potential negative impact on Bitcoin's price in September.

Fig 3. Mt. Gox currently holds 44,898 BTC ($2.65 billion), one-third of the initial holding.

2.3. Genesis Trading's Debt Repayments

Genesis Trading, which filed for bankruptcy in January 2023, completed much of its debt restructuring in August 2024. On August 2, the firm distributed 24,068 BTC ($1.55 billion) for repayments, contributing to price declines earlier in the month. With this substantial amount already liquidated, it is unlikely that similar large-scale sell-offs will occur in September, offering some relief to the market.

Fig 4. The severe August 5 market crash came after Genesis Trading distributed 24,068 BTC ($1.55 billion) for repayments.

2.4. Confiscation Funds

Governments with significant confiscated BTC holdings, such as the U.S. and the UK, could also pose a threat to Bitcoin prices. However, recent actions suggest that this risk may be overstated. The U.S. government, which holds 203,650 BTC ($12 billion), has moved and sold some of its BTC holdings but has done so through over-the-counter (OTC) sales, which have had minimal impact on market prices. The UK government, which holds 61,245 BTC ($3.62 billion), has not touched these funds since seizing them in 2021. Therefore, the potential for government-related sell-offs appears limited in the near term.

Fig 5. The US government moved 35,516 BTC ($1.48 billion) to Coinbase at an average price of $41,637 in 2023 and 2024, but overall there were only weak price reactions.

3. Strength of Long-Term Holders

Another positive factor for Bitcoin is the strong position of long-term holders. According to CryptoQuant, long-term holders have increased their supply by 262,000 BTC over the past 30 days, bringing their total to 14.82 million BTC—equivalent to 75% of the total supply.

Fig 6. The long-term net position change (30D) of Bitcoin (source: CryptoQuant).

Additionally, many top anonymous Bitcoin wallets, holding substantial amounts of BTC, have remained dormant, indicating that these holders are not looking to sell in the near future. This strong holding pattern provides a solid foundation for Bitcoin, reducing the likelihood of significant downward pressure from long-term holders in September. For example, when analyzing the top 10 anonymous BTC-holding wallets, we noticed that 7 wallets have been inactive for over 2 years. Together, these 7 wallets hold 237,816 BTC ($14.04 billion), or 1.2% of the circulating supply.

Fig 7. The status of the top 10 anonymous BTC-holding wallets.

4. September Rebound for Bitcoin ETFs

Based on the observed trends in the chart, September could potentially see a modest positive net inflow for Bitcoin ETFs. After a slight negative flow in August, the pattern of alternating between positive and negative months suggests a potential rebound. Considering that previous downturns were followed by recoveries, a conservative estimate for September might be a net inflow ranging from $500 million to $1,500 million. However, this prediction is speculative and should be interpreted with caution, as market conditions can change rapidly.

Fig 8. The alternating pattern between positive and negative monthly net inflows of 11 US Bitcoin ETFs.

5. Favorable Socioeconomic Conditions

Several upcoming socioeconomic events may further support Bitcoin's price in September:

5.1. Anticipated Federal Reserve Interest Rate Cut

The Federal Reserve is widely expected to cut interest rates by 25 basis points in September 2024, marking the first reduction in 13 months. A lower interest rate environment typically makes traditional investments less attractive, potentially driving investors toward higher-risk, higher-reward assets like cryptocurrencies. This shift could create additional demand for Bitcoin or Bitcoin ETFs, offsetting some of the historical negative trends associated with September.

Fig 9. The historical inverse relationship between interest rate and Bitcoin price (source: Bloomberg).

5.2. FTX's Repayment of $16 Billion in Cash

FTX's upcoming repayment of $16 billion in cash to creditors in late September and early October could also impact the crypto market. Many of these creditors are likely to reinvest in cryptocurrencies, potentially providing a significant capital injection into the market. Combined with a lower interest rate environment, this could bolster Bitcoin's price.

Fig 10. The FTX creditor recovery summary (source: Kroll).

5.3. Supportive U.S. Political Climate

Both U.S. political parties are showing increasing support for favorable crypto regulations, which could enhance investor confidence. For instance, Kalama Harris has received public backing from crypto leaders and has been actively engaging with the industry. Meanwhile, Donald Trump has reversed his previous stance on crypto, now advocating for easing regulations and establishing a National Strategic Bitcoin Reserve. This bipartisan support could create a more favorable regulatory environment, further supporting Bitcoin's price.

Conclusion

While September has historically been a challenging month for Bitcoin, several factors suggest that this year may be different. The clearing of major selling pressures in July and August, the strong position of long-term holders, and favorable upcoming socioeconomic events all provide reasons to believe that Bitcoin's price may not necessarily follow its typical September pattern. While caution is always warranted, the outlook for Bitcoin in September 2024 appears more optimistic than historical data alone might suggest.