Why September’s cryptocurrency market was yet another bust

September is turning out to be yet another dismal month for the cryptocurrency market, with no signs of a break from the bear market in sight.

September saw the crypto market continue to perform poorly, as seen by the month-long weakness of important metrics including volumes, volatility, and Open Interest (OI).

cryptocurrency market  bust
Source: Forbes

According to statistics from CoinMarketCap, the overall market capitalization of cryptocurrencies decreased by 1.8% during the previous month as bellwethers like Ethereum [ETH] and Bitcoin [BTC] moved within narrow trading ranges.

Why September’s cryptocurrency market was yet another bust,Why September’s cryptocurrency market was yet another bust

In fact, the most of the time, the king coin fluctuated between $25,900 and $27,200, whilst ETH remained in the $1,600 range. The quiet price movement discouraged traders from using cryptocurrency trading platforms.

Spotlight on the derivatives markets

The digital asset analytics company Reflexivity analytics reports that traffic on significant exchanges like OKX and Binance [BNB] remained drab. Compared to prior years, when traders often sold their assets in order to make rapid profits, this was a dramatic change.

Ethereum Futures ETFs on the Horizon

Notably, data from Glassnode shows that the liquid supply of Ethereum and Bitcoin declined even more in September. Trader shift to self-custody was prompted by dwindling trust in the reliability of exchanges as well as more profitable use cases like staking and long-term HODLing.

Furthermore, the cryptocurrency market—which was previously notorious for its wild price fluctuations—surprisingly went into slumber. September’s 1-month realised volatility for Bitcoin decreased in tandem with the asset’s decline in value.

Even as the historical volatility fell, the market’s general pessimism was also reflected in the implied or forward-looking volatility. September saw a decrease in Deribit’s implied volatility index, indicating that the market would remain quiet going forward.

As a result, hopes for a significant price increase were dashed.

Digital assets are highly significant in derivatives markets. This is so because experienced traders seek to profit from possible increases and decreases in value because cryptocurrencies are speculative by nature.

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One helpful statistic to examine this market is the Open Interest (OI), which counts the total amount of money invested in derivatives at any particular moment. The quantity of open positions (long and short) in the market is monitored by the OI.
Reflexivity Research reports that September saw a further decline in the dollar value trapped in Bitcoin’s unsettled contracts on futures platforms.

Remarkably, the futures market was still reeling from the blows inflicted last month, when the largest cryptocurrency market crash of 2023 destroyed billions of dollars in original investment.

Why September’s cryptocurrency market was yet another bust,Why September’s cryptocurrency market was yet another bust,Why September’s cryptocurrency market was yet another bust

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