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Cryptocurrency News Articles
Bitcoin defies historical trend, on track for one of its best monthly performances in years
Sep 29, 2024 at 05:30 pm
The world's largest cryptocurrency has risen over 10% this month, defying a historical trend that typically sees prices decline during this time.
Bitcoin is set for one of its best monthly performances in years, defying a historical trend that usually sees prices decline during this time.
The world’s largest cryptocurrency has risen over 10% this month, helped by a wave of global interest rate cuts, notably from the US Federal Reserve, that are boosting market confidence.
Bitcoin is trading at around $65,334 on recent Friday, up 1.2% on the day. It has risen 56% so far this year, aided by heavy inflows into Bitcoin exchange-traded funds (ETFs) in the United States, but is still below a peak of $73,798 hit in March.
Bitcoin has tended to perform poorly in September. Over the past decade, the average decline in Bitcoin’s price during the month has been about 5.9%, according to a recent analysis by crypto data firm IntoTheBlock.
But this year marks a distinct departure from that trend. Bitcoin began the month trading around $58,463. A 5.9% loss from that level would put Bitcoin at around $54,988 by the end of September.
Instead, if Bitcoin can hold onto its recent gains and close the month near current levels, it will be notching one of its best Septembers in recent memory.
"Bitcoin’s correlation with monetary policy is especially strong when it comes to the Federal Reserve," said Sean McNulty, trading director at Arbelos Markets.
"The market is reacting to the Fed cutting rates as quickly as possible. This is creating a ‘risk on’ environment, which is helping Bitcoin,” he added in emailed comments.
Battered by high inflation and slowing growth, the Fed began raising interest rates earlier this year. But recent data showing easing price pressures and weaker consumer spending have prompted the central bank to shift gears.
Earlier this month, the Fed delivered its smallest rate increase since March, a move that was largely priced in by markets.
But markets are now speculating on the possibility of the Fed pausing or even cutting rates next year, a scenario that could bode well for riskier assets like Bitcoin.
"Bitcoin is up year-to-date, and this is largely due to the optimism in the market, which is being aided by favorable monetary conditions," McNulty said.
Bitcoin’s price movements are also being closely watched as the options market reacts to the expiring contracts.
"The $65,000 price point is key with numerous options contracts expiring. If Bitcoin fails to hold above $65K decisively, look for a downturn," warned analysts at crypto exchange Kraken in recent commentary.
Meanwhile, smaller cryptocurrencies are also rallying, with dogecoin and XRP posting gains of over 20% and 10%, respectively, over the past seven days, according to CoinGecko.
The broader crypto market recovery comes as investors are shifting their attention away from traditional assets and towards digital currencies like Bitcoin.
The central banks’ actions are increasing market liquidity, allowing many investors to pivot into cryptocurrencies.
This shift is especially evident among institutional investors, who are adding Bitcoin and other digital assets to their portfolios.
The launch and growth of Bitcoin ETFs have been crucial in these dynamics. These funds allow traditional investors to gain exposure to Bitcoin without directly purchasing the cryptocurrency, an endeavor that typically attracts higher levels of risk.
This accessibility has attracted large inflows, which are helping to support Bitcoin’s price movements.
Bitcoin options traders are bracing for a period of heightened volatility as large sums of money are set to expire on the derivatives market on recent Friday.
Recent data showed that around $1.3 billion in Bitcoin options premiums will expire on Deribit, the world’s largest crypto options exchange, at 08:00 ET. This marks a significant increase from the roughly $660 million that was due to expire last month.
"We can expect a volatile session into the options expiry, especially with the market being bullish and having risen substantially over the past few months," said Nikita Patel, a crypto options trader at Deribit Options, in emailed comments.
"There is a lot of interest in the higher strike prices, which could indicate bullish sentiment and expectations of further upside," he added.
Institutions are also showing interest in the lower strike prices, which could signal a belief that Bitcoin is set to correct, Patel said.
Options traders are betting on whether Bitcoin will rise or fall to a particular "strike" price by a specific date. If their prediction is correct, they stand to make a profit.
Options contracts give the holder the right, but not the obligation, to buy (in the case of a call option) or sell (in the case of a put option) a certain amount of Bitcoin at a set price on or before the expiration date.
Call options are typically used to bet on rising prices, while put options are used to bet on falling prices.
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