Will the FOMC provide relief?

Bitcoin (BTC) and the broader crypto markets are going through challenging times, with historical struggles escalating in September.

In a recent report, Caico researchers examined how the US devaluation and other key economic events could affect Bitcoin. These four charts provided by analysts explain what to expect from BTC in the coming weeks.

Monthly change in Bitcoin price in September

As BeinCrypto reports, the third quarter has historically been a challenging one for Bitcoin and the broader crypto market, with September often providing the worst returns. Kaiko has dropped bitcoin in seven of the past twelve Septembers.

In the year In 2024, this pattern will continue, with Bitcoin down 7.5% in August and 6.3% in September so far. At the time of writing, Bitcoin is trading more than 20 percent above its most recent high of nearly $73,500 five months ago.

Read more: How to buy Bitcoin (BTC) and everything you need to know

However, according to Caico Research, recent U.S. devaluations could put assets like Bitcoin at risk. Bitget Wallet COO Alvin Khan shares this position.

“At the Jackson Hole meeting, Federal Reserve Chairman Jerome Powell hinted that now might be the time for a policy adjustment, which would cut future interest rates. The U.S. dollar index responded by falling sharply and is now trading around 100. With the September rate cut becoming a consensus, prices A public launch of a bearish trade could improve overall market flow, giving crypto assets a boost, Khan told BInRipto.

30-day historical volatility

According to the report, September is turning out to be highly volatile, with Bitcoin's 30-day historical volatility rising to 70%. This metric measures the volatility of an asset's price over the past 30 days, showing how dramatically the price has moved over that period.

Bitcoin's current volatility is nearly double that of last year and is approaching the peak seen in March, when BTC reached a peak above $73,000.

Ethereum (ETH) experienced higher volatility than March and Bitcoin, driven by ETH-specific events such as jump trading liquidity and the launch of Ethereum ETFs.

BTC implied volatility in the end

Since early September, Bitcoin's implied volatility (IV) has risen after dipping in late August. The IV indicator measures market expectations for future price fluctuations based on current options trading activity. A higher IV indicates that traders expect larger price changes ahead, even if it does not reveal the direction of the movement.

In particular, short-duration options expiring saw a sharp increase, with expirations on September 13 jumping from 52% to 61%, outperforming end-of-the-month contracts. To the layman, when short-term implied volatility exceeds long-term benchmarks, it indicates heightened market stress, called an “inverted structure.”

Risk managers often view an inverted structure as a sign of high volatility or market stress. As a result, they may interpret it as a warning to de-risk their portfolios by reducing exposure to volatile assets or hedging against losses.

“These market expectations are in line with last week's US jobs report, which dimmed expectations of a 50bps contraction. However, upcoming US CPI data could still make the odds worse, Caico researchers noted.

Business volume

Bitcoin trading volumes chart highlights the current market volatility, which increases trader participation. Cumulative trade volume is nearing a record $3 trillion in the first eight months of 2024, up nearly 20% from the last peak in 2021.

Read more: Bitcoin (BTC) Price Prediction 2024/2025/2030

Typically, Bitcoin investors view price declines as a positive market stimulus. However, concerns remain about how the market will interpret the sharper-than-expected decline. Marcus Thielen, founder of 10X Research, warns that a 50 basis point drop could be seen as a sign of a crisis, which could lead to a retreat from riskier assets like Bitcoin.

In a note to clients, Thielen said: “While a 50 basis point cut by the Fed would indicate deeper concerns for markets, the Fed's primary focus will be to mitigate economic risks rather than manage market reactions.”

Aside from bearish speculation, other factors contributing to crypto market volatility include the upcoming US elections. As reported by BeInCrypto, the debate between Donald Trump and Kamala Harris is expected to create activity, especially in Bitcoin and Ethereum.