Bitcoin Reverses Recent Gains At Start of Bearish September

September is traditionally a bearish month for Bitcoin. New economic data out this week will set the course ahead.

In a sharp reversal from the previous week’s gains, Bitcoin (BTC) plummeted over 10% in the week leading up to September 1, as a pause in the dollar’s recent decline sparked renewed pressure on the leading cryptocurrency. The dollar index’s stabilization put an abrupt halt to Bitcoin’s brief recovery, underscoring the cryptocurrency’s sensitivity to broader economic indicators.

Source: BNC Bitcoin Liquid Index

This week, investors are bracing for a series of key U.S. economic releases that may signal the future trajectory of the dollar and, consequently, risk assets like cryptocurrencies. The economic data rollout begins on Tuesday with the Institute of Supply Management’s (ISM) manufacturing purchasing managers’ index (PMI) for August. Forecasts by ForexLive anticipate a slight rise in the index to 47.5, up from July’s 46.8, which marked the sharpest contraction in factory activity since November 2023.

Market watchers are particularly attentive to the implications of these figures for future Federal Reserve actions. A weaker-than-expected PMI could bolster the case for rate cuts, potentially weakening the dollar and boosting demand for riskier assets like Bitcoin.

According to CME’s FedWatch tool, interest rate markets are already pricing in a 70% likelihood of a 25 basis point cut and a 30% possibility of a 50 basis point reduction at the Fed’s September meeting.

The sensitivity of Bitcoin to monetary liquidity was evident as July’s lower-than-expected ISM PMI triggered recession fears, impacting risk assets negatively even as the dollar weakened. Bitcoin’s price dropped 3.7% to $62,300 on the day the PMI data was released. “This is a key metric as risk assets moved sharply lower the last time,” noted Markus Thielen, founder of 10x Research.

Additional economic indicators due this week include the JOLTS job opening data on Wednesday, followed by the ISM services PMI, ADP, and weekly jobless claims on Thursday. The week’s focal point will be Friday’s nonfarm payrolls (NFP) report for August. ING analysts project a consensus expectation of 165,000 job gains and a reduction in the unemployment rate to 4.2%, which might confirm a 25 basis point cut as the beginning of the Fed’s easing cycle on September 18. However, ING’s U.S. economists suggest a less rosy scenario, with only 125,000 job additions and an unemployment rate increase to 4.4%, which could further depress the dollar.

Meanwhile, U.S.-listed exchange-traded funds (ETFs) tracking Bitcoin experienced a net outflow of $175 million last Friday, extending a four-day losing streak. In contrast, Ether (ETH) ETFs saw no net inflows or outflows despite a trading volume of $173 million, according to data from SoSoValue. Traditional U.S. markets will be closed for the Labor Day holiday.

September’s Bearish Seasonality

History has shown that September is the worst-performing month for Bitcoin.

Source: X

However, 2015, 2016, and 2023 data show that Bitcoin’s price was able to see surges in September as well, of 2%, 6%, and almost 4% respectively.

As revealed by the historical price moves of Bitcoin, from 2013 until 2023, September was bearish for BTC, apart from the three exceptions mentioned above.

Even if, overall, BTC’s seasonality shows that this month has been the worst for the digital asset, history might not necessarily repeat itself. This month’s potential rate cuts by the Federal Reserve could provide a break from this trend, enhancing Bitcoin’s appeal as a store of value amidst increased dollar liquidity.