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September is a good time for pumpkin picking and your favorite Starbucks lattes... but maybe not for your crypto portfolio.
"Looking ahead, seasonality is not in favor of the asset class as September has tended to be a terrible month for Bitcoin and Ethereum," analysts at Bespoke Investment Group wrote in a note to clients last week.
If prices for cryptocurrencies like bitcoin and ether do suffer this month, it wouldn't be out of the ordinary for how they've performed in 2022 overall. As of Tuesday morning, bitcoin's price is down and around 58% so far this year, and ether has fallen around 56%.
Financial assets overall have struggled amid soaring inflation and interest rate hikes — a tool the Federal Reserve uses to cool economic activity when consumer prices are high, but that can also crimp the prices of investments that might be in your portfolio, like stocks and crypto.
September is known for being a bad month for the stock market. As Money reported last week, the S&P 500 has fallen a median of 0.42% and seen positive returns just 44.7% of the time in September since 1928, according to data from Bespoke.
But the start of fall may also spell trouble for crypto investors.
Do crypto prices rise or fall in September?
Over the last five years, bitcoin's average price drop has been around 8.5% in September, according to data from Bespoke. That's compared to an average increase of 24.6% in October, and jumps of 7.9% in November and 11.1% in December. Looking back over the course of Bespoke's data starting in October of 2014, bitcoin's price has been higher from the beginning to end of September just 28.6% of the time, with an average loss of 4.82%
It's a similar story for ether. Over the last three years, ether's price has dropped an average of 8.5% in September compared to rising an average of 17.5% in October. And looking back to Bespoke's Ethereum data since November of 2017, the crypto's price has been higher from the beginning to end of September just 25% of the time with an average loss of 10.8%.
However ether's monthly performance in June has been worse than September, with the price dropping an average of 15% during that month over the course of Bespoke's data.
What can we expect from crypto prices this year?
Cryptocurrency prices are anything but predictable. Something as seemingly insignificant as a tweet can cause a price to skyrocket or plummet.
Still, experts say that investors have been taking some risk off the table recently in the face of Federal Reserve interest rate hikes. All eyes will be on the central bank's next move as its next policy meeting looms later in September.
There's also a major event happening soon in the crypto world called "the Merge," which is an upgrade to the Ethereum blockchain. The Merge will transition the Ethereum network from the proof-of-work model to the proof-of-stake model, which should significantly reduce its energy consumption and lay the groundwork for other aspects of its roadmap, like making transactions more efficient.
Beware that there might be volatility in ether's price as the Merge approaches, but some experts say it could boost prices in the long run.
Overall, remember that crypto prices are risky and volatile. Financial advisors tend to say that if you are going to invest in cryptocurrency, you should limit it to a small portion of your portfolio — like 2% to 5% — and treat it as a long-term investment instead of trying to get rich quick.
Also, just because crypto prices have historically suffered in September doesn't mean they will this year. As with any kind of investing, past performance is never a guarantee of future performance — and trying to time the market based on factors like seasonality is always a gamble.