September could be a watershed month for bitcoin. Big decision on the horizon

August 2024 turned out to be an exceptionally bad month for Bitcoin and the broader market. The total capitalization of digital assets decreased by more than 13%, and many cryptocurrencies reached half-year lows. This decline also reflects a general reduction in investor activity, which affected not only cryptocurrencies themselves, but also other sectors such as DeFi and NFTs. This result is confirmed by the Monthly Market Insights – September 2024 report by Binance Research.

Experts warn that August’s declines may be just a precursor to more trouble in September. This month historically brings the worst returns for cryptocurrencies, and data from previous years is not encouraging. Will Jerome Powell, the chairman of the US Federal Reserve (Fed), break this bad streak by introducing a long-awaited interest rate cut?

Cryptocurrency market plunges

August 2024 brought significant turmoil in the financial markets. The Bank of Japan unexpectedly raised interest rates, which caused quite a stir on the global stock exchanges, including Wall Street. This also affected the cryptocurrency market, which experienced a 13.1% drop in total capitalization. This was contributed to by macroeconomic concerns and worrying unemployment data in the US, which caused fears of a recession.

Bitcoin, despite trying to make up for losses after a violent “flash crash”, ultimately ended the month 8% lower. The DeFi and NFT sectors also suffered badly, losing an average of almost 11%. Investors, worried about the situation, moved en masse to stablecoins, which turned out to be the only stable asset in August. The total number of on-chain transactions using them rose to 420 million, and their value reached $170 billion.

After a weak August, an even tougher September could follow. Historical data clearly indicates that Q3 is typically the worst quarter for cryptocurrency, with September standing out as the worst month of the year. What’s more, the average cryptocurrency market cap has consistently declined at the end of the quarter over the past few years – with the exception of 2023.

However, everyone is waiting for the Federal Reserve’s decision, which could prove to be a breakthrough. The Fed, after eight meetings without changing interest rates, is preparing for its first rate cut in over a year. The meeting scheduled for September 17-18 could prove to be crucial for the future of bitcoin and other cryptocurrencies.

New hope for bitcoin?

As US inflation slows to approach its 2% target, the Federal Reserve is starting to turn its attention to rising unemployment. Lowering interest rates should spur capital flows into the economy, which could revive financial markets, including cryptocurrencies. A similar situation occurred in 2020-2021, when a cycle of easing led to market gains.

According to experts, lower interest rates make investors more willing to take risks, especially when safe investments like bonds or savings accounts bring lower returns. As a result, September 2024 could prove to be a key month for the cryptocurrency market, similar to November, when the US presidential election will be held.