Crypto investors are focusing on mid-September as the August rally cools
After improving economic data and low trading volume led crypto’s rally through the first half of August, cryptocurrencies fell early Friday morning.
Now, investors are weighing their options ahead of a key series of events slated for mid-September, when inflation data, the Federal Reserve’s latest rate hike and the Ethereum merger are set to take place in quick succession.
On Friday, bitcoin (BTC-USD) and ethereum (ETH-USD) were down around 8% over the past 24 hours, with bitcoin trading below $21,400 and ether falling below $1,700.
“They call this period the summer lull,” Sean Farrell, head of digital asset research at Fundstrat told Yahoo Finance Live on Friday.
“Fund managers are taking time off, and in this low-volume environment, a lot of people are sitting on their hands, waiting for the macro situation to look more constructive.”
Since the beginning of June, the total crypto market has climbed from a low of $820 billion to $1.04 trillion. Over that time, trading volumes have remained well below last year’s lowest trading period – June to July 2021 – according to CoinMarketCap. Daily volumes have been muted, consistently hovering below $70 billion over the past 60 days.
From the peak in November 2021 to the most recent bottom on June 18, bitcoin lost 72% of its value. The implosion of the $45 billion Terra ecosystem has sent at least three major crypto firms into ongoing bankruptcy proceedings.
Going forward, Farrell said “investors are going to want to stay on their toes” as market dynamics can change very quickly, with investors looking at both economic and technical factors to set the tone for the crypto markets over the course of the year. .
“We expect things to pick up in September,” Michael Safai, a partner at crypto-proprietary trading firm Dexterity Capital told Yahoo Finance.
Both Safai and Farrell see an important nine-day stretch between September 12 and 21, where they expect increased volatility in the crypto markets.
On September 12, new inflation data will arrive when the BLS releases its latest consumer price index. On the same day, the Chicago Mercantile Exchange (CME) will launch an options product for ether futures.
Days later, the second largest cryptocurrency’s underlying blockchain, Ethereum, will begin its final transition from proof-of-work to proof-of-stake, which crypto investors have dubbed “The Merge.”
Long awaited, but not fully understood by many, “The Merge” will eliminate crypto mining for Ethereum, reducing energy costs by 99% according to estimates from the Ethereum Foundation, while the transition to staking could fundamentally change the value of ether.
While he expects growing retail enthusiasm around the merger, Safai pointed out that “the upside may be limited in the event sentiment for the merger is met with dismal economic data.”
Regardless, he plans for more volatility.
Luke Farrell, a crypto trader who handles over-the-counter spot and derivatives orders for crypto market-making firm GSR, sees the period as a crucial inflection point for how the broader crypto market may perform through the fall.
“All of these events combined usually mean a lot of uncertainty and that could mean an increase in volume, but I think the information value from that September period will also turn out to be much higher than August,” Farrell said. “There will be a lot more to read through about what happens next.”
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