What to Expect for Bitcoin and the Cryptocurrency Market in September?

• The approval of a Spot Bitcoin ETF remains the most significant catalyst to watch in the market. Grayscale’s recent victory against the SEC has been a significant milestone.
• The crypto market is on edge as it approaches the second deadline, around mid-October, and there’s a consensus among analysts that the SEC is inclined to further delays.
• Perhaps the most anticipated economic indicator in September is the Consumer Price Index (CPI) report, scheduled for release on September 13th. This report will shed light on inflation trends in the U.S. economy.

Bitcoin may not experience high volatility in the first week of September, but upcoming economic events can have a significant impact on prices.

A Calm Start to September for Bitcoin

Both the Bitcoin and cryptocurrency markets are beginning the week on a relatively calm note in terms of both crypto-related events and noteworthy macro data. This week, key macro data such as the U.S. Manufacturing and Services PMI and jobless claims are quite limited. However, it’s unlikely that these events will have a significant impact on the U.S. Dollar Index (DXY) and, therefore, on Bitcoin and cryptocurrencies.

Therefore, we make an exception this Monday and look at the entire month of September in our weekly preview. September hosts many crucial events and may also bring some surprises.

The approval of a Spot Bitcoin ETF remains the most significant catalyst to watch in the market. Grayscale’s recent victory against the SEC has been a significant milestone. JPMorgan stated, “There is probably no alternative to the SEC approving spot Bitcoin ETFs after winning the Grayscale SEC case.” However, the timing looks uncertain.

The crypto market is tensed as it approaches the second deadline, around mid-October, and there’s a consensus among analysts that the SEC is inclined to further delays. The first “ultimate” deadline was set for January 10th for Ark. Moreover, the market’s lukewarm response to Grayscale’s victory and subsequent quick pullback are seen as indicators of accumulated concerns and expectations over time.

However, the Grayscale victory has added an element of unpredictability. The window for the SEC to appeal the court decision closes on October 14th, coinciding with a second deadline for other institutional giants like BlackRock, Fidelity, and Invesco. However, making a definitive decision on the spot Bitcoin ETF in September could bring an unexpected turn in the Grayscale-SEC negotiations.

Consumer Price Index (CPI) Report on September 13th

Perhaps the most anticipated economic indicator in September is the Consumer Price Index (CPI) report, scheduled for release on September 13th. This report will provide insights into inflation trends in the U.S. economy. After a period of consistent declines, July’s CPI showed a surprising increase. Financial markets are now trying to determine whether this is the beginning of a new inflation trend or merely an anomaly.

The Federal Reserve’s recent comments on CPI reports were somewhat optimistic. However, Federal Reserve Chairman Jerome Powell’s recent statements serve as a reminder of the volatility and unpredictability of economic indicators. If September’s CPI report again shows worrisome inflation trends, it could open discussions about another interest rate hike in 2023.

In July, the Consumer Price Index (CPI) increased by 0.2% on a seasonally adjusted monthly basis, the same level as the June increase. Over the past 12 months, CPI increased by 3.2% on a year-over-year (YoY) basis. Core CPI increased by 0.2% monthly, similar to June, and by 4.7% YoY (slightly below expectations). July marked the fourth consecutive month of a decrease in YoY Core CPI.

FOMC Meeting on September 20th

The Federal Open Market Committee (FOMC) meeting is another important event in the financial calendar for September. This meeting is particularly important as it follows the recent rise in the CPI and the persistently high Personal Consumption Expenditures (PCE) data, which stands at 3.3%. Since the Fed’s self-imposed 2% inflation target has not yet been achieved, there is a strong consensus in the market that interest rate hikes will take a break.

Every word spoken by Jerome Powell will be thoroughly analyzed for insights into the Fed’s future strategy. Recent economic data presents a complex picture. On one hand, there’s a sharp decline in U.S. consumer confidence, a decrease in job listings, and continued contraction in U.S. manufacturing, all painting a negative picture.

On the other hand, the Core PCE, the inflation measure preferred by the Fed, increased as expected. Temporary increases in non-core services, closely monitored by Powell, further complicate the narrative. However, a pause seems likely if CPI doesn’t rise again.

More Crypto Activity

Decentralized exchange dYdX is preparing for a significant update with the launch of V4 on the Cosmos application chains. One notable feature of this update is an on-chain order book that will be audited by dYdX chain validators. This means transaction revenue will no longer go to centralized entities like dYdX Trading Inc., redirecting it to DYDX token holders, which is significant given its current $362 million market cap and $2.09 billion fully diluted valuation. However, caution should be exercised regarding the 40% of DYDX set to be released in December.

Coinbase’s Base platform is gaining attention in the crypto community. Since its inception, Base has rapidly accumulated $400 million in Total Value Locked (TVL). A significant portion of this liquidity, $190 million, has garnered attention due to incentivized farms and token pools.

While current TVL may stabilize at this level, several major protocols on Base may act as magnets for liquidity in September. Notable projects leaving their mark on Base include industry giants like Curve, Uniswap, 1Inch, and Aave.