Despite cooling off recently, cryptocurrencies are entering their seasonal sweet spot as leadership shifts slightly more to toward alterative coins beyond Bitcoin.
Fall is upon us, and many on the NDW team are looking forward to enjoying our favorite sports leagues and holidays, especially as school and market activity pick up. With so much packed into the season, it’s no surprise that nearly 40% of Americans call Fall their favorite. Though not the primary reason for the Fall’s popularity, cryptocurrencies have given investors even more to celebrate, with cryptocurrencies historically seeing a notable uptick as the it begins. October might be the scariest month of the year, but it has been anything but scary for Bitcoin ($BTC). The last time Bitcoin declined in October was 2018, falling 3.9% in a month marked by Trump’s USMCA trade negotiations while Patrick Mahomes lit up the NFL as a first-year starter. Aside from 2018, Bitcoin has posted gains in every October over the past decade, averaging a monthly return of 20.5%. With seasonality serving as a potential tailwind for cryptocurrencies, should investors expect better times ahead?
It’s been a busy year for cryptocurrency, with deregulation and government support being a large tailwind for space. However, the past quarter was quiet for the bellwether of the cryptocurrency space, with Bitcoin gaining a relatively muted 2.4%, even as it briefly touched new all-time highs above $120k.
In Bitcoin’s stead, other coins surged in Q3, with Ethereum ($ETH) gaining 62%. Strength has widened across the space, with all nine members of the Nasdaq Crypto Index (.NCI) now in positive trends—up from just three last quarter. Broader participation is a constructive sign for the crypto market. That said, things have slowed down in September.
The Hashdex Nasdaq Crypto Index US ETF (NCIQ) provides exposure to all cryptocurrencies approved for US spot ETFs and currently includes only Bitcoin and Ethereum. NCIQ broke a triple bottom at $29.50 last week, and its fund score has fallen 1.27 points from its peak this summer. Still, it maintains a respectable fund score of 3.32 and offers potential diversification within the crypto space. Those looking for additional exposure to the asset class should keep an eye on the fund, especially if the space starts to pick back up.
While the slowdown in crypto has deviated from its movement in months prior, it aligns closely with the typical performance of the group. Historically, Bitcoin slows down during the summer months, with August and September being particularly weak. Looking at the average return of Bitcoin in each month dating back to 2011, August and September are by far the worst in terms of their return, with Bitcoin actually declining on average. Upside has typically been capped during these months too. Even at the 75th percentile, returns remain below 10%—the lowest of any two-month stretch. However, the upcoming months do offer the potential for Bitcoin to pick up during its seasonally strong period. Specifically, October and November have been some of the strongest months for Bitcoin, averaging returns of 11.9% and 18.7%, respectively.
Furthermore, October ushers in the strongest seasonal period for Bitcoin. From the end of September to the end of May, Bitcoin averages a gain of 133.7% over those eight months. Meanwhile, it averages a 5.6% gain from June to September, meaning that almost all of Bitcoin’s gains have historically come outside the summer months. Similarly, the NDW index of the ten largest cryptocurrencies by market cap (DWACRYPTO) has averaged a 13.3% gain during the weak period and a 166.8% gain during its strong period. Despite early-year weakness, Bitcoin’s performance has closely mirrored its historical average, remaining relatively flat from late May to now. On the other hand, DWACRYPTO rose 26% during the weak period, highlighting the relative strength of altcoins during a typically sluggish stretch.
Seasonality alone doesn’t drive markets, but it can offer useful context, especially when supported by broader market trends and technical indicators. While crypto momentum has cooled off from summer highs, seasonal trends and expanding breadth offer reasons for optimism. For those with the right risk tolerance, an improvement within cryptocurrencies could offer more than just pumpkin spice and playoff races this Fall.
