You May Not Want to Touch Crypto This September

August 24, 2022

Cryptocurrencies: Weekly Update


We’re probably all familiar with the common saying ‘Sell in May and Go Away’ which refers to the period from May to October when global equities markets typically slump. Typically, this seasonal effect makes its biggest impact in September, which is historically the worst month of the calendar year for both Stocks as well as Cryptocurrencies now too!

It's not at all surprising to see a similar calendar effect taking place in cryptocurrency markets, especially given the well-known correlation between Bitcoin and major stock indices (particularly the Nasdaq 100).

Bitcoin has historically averaged a positive return for every month of the year excluding September, which reinforces the idea that Bitcoin and most other cryptocurrencies can be considered as risk assets rather than alternative investment opportunities.

There is simply too much going against global equity markets and especially the nascent crypto market for us to have an optimistic outlook on the next few weeks of crypto price action.

Our hesitation in regards to trading the crypto market in September is reinforced by the break-down of the recent countertrend in both stocks and cryptos, which has seen both asset classes run into major resistance amidst further uncertainty around inflation and the global economic recovery.

Bitcoin is back below its 50-day moving average for the first time since late July and is in a vulnerable spot sitting at the bottom of its current range. A further breakdown from here would likely result in a retest of 2022 lows, with the next level of support potentially being as low as $18,970 (-12.6% from current prices).

With all of that being said, our CryptoPulse Quant (CPQ) trading strategy has signaled us to go back to cash for the time being after executing successful trades in MATIC and UNI over the past 5 weeks. Although it may not be exciting to remain in cash when cryptocurrencies can move +/-10% on any given day, it has proven to serve us well in the past.

Remember, the CPQ spent nearly 3 consecutive months in cash during the first half of 2022 which at the time was frustrating, but in hindsight kept us from trading in one of the worst market environments in decades.

The good news is that there is still plenty of light at the end of the tunnel, with October and November historically being the #3 and #1 best months for Bitcoin. So whether the Quant puts us into any trades in September or decides to stay in cash, for the time being, at least we know that there should be more opportunities to trade later this year.

One interesting thing about the past week has been Ethereum’s 50-day moving average.

ETH sold off -25% from peak to trough last week, but did maintain its 50-DMA on price as well as both the 50 and 200-DMA on momentum according to RealMotion. This may be a bit reassuring for ETH, but seems to be a one-off trend related to Ethereum’s upcoming merge to Proof-of-Stake rather than an actual marketwide trend.

We know this by observing several of the largest cryptocurrencies by market cap and seeing that most are actually already below their 50-day moving averages, Bitcoin included:

Even though technicals are looking fairly bleak for most of the crypto market, there is one other potentially tradeable coin other than just ETH in September, and that would be Binance Coin (BNB).

Although BNB isn’t available on most American crypto exchanges, it is the #3 tradable cryptocurrency by market cap behind BTC and ETH and is the exchange token for Binance, the largest cryptocurrency exchange in the world by trading volume (You still can trade BNB on Binance.US and FTX).

BNB is maintaining its positive trend after a strong bounce off of its 50-day moving average, but is currently sitting below resistance at its 10-dma:

There has also been a golden cross for long-term momentum according to RealMotion, even though the short-term momentum looks to be in trouble with a bearish cross.

BNB has been riding the wave of continuous good news and further global adoption of the Binance exchange thanks to the public figure that is its founder and CEO Changpeng Zhao (CZ).

One of the exchange's biggest recent accolades has been in regards to its partnership with Mastercard which was discussed by Mastercard’s CEO on LinkedIn earlier this week…

This partnership between the two companies just goes to show how mainstream cryptocurrencies and blockchain continue to become in modern life, and helps you imagine how much bigger the industry can grow in coming years.

The markets don’t look great for September, but hey, they almost never do this time of year. Be careful if you do decide to trade crypto for the foreseeable future and if you do, always make sure to keep resting stops!

Check out our new CryptoPulse Twitter account @MGCryptoPulse for daily tweets and updates about the crypto space!