Bitcoin (BTC) and the broader cryptocurrency market are experiencing challenging market conditions, with September’s seasonal difficulties historically exacerbating market conditions.

In a recent report, Kaiko researchers recently explored how U.S. interest rate cuts and other major economic events could affect Bitcoin. These four charts provided by the analysts explain where BTC could go in the coming weeks.

Bitcoin price monthly change in September

As reported by BeInCrypto, the third quarter has historically been challenging for Bitcoin and the broader cryptocurrency market, with September often delivering the worst returns. Kaiko highlighted that Bitcoin has fallen in seven of the past 12 Septembers.

The pattern has continued in 2024, with Bitcoin down 7.5% in August and 6.3% so far in September. As of this writing, Bitcoin is trading more than 20% below its all-time high of nearly $73,500 set more than five months ago.

However, Kaiko Research believes that the upcoming interest rate cut in the United States may boost risk assets such as Bitcoin. Alvin Kan, COO of Bitget Wallet, also holds this view.

“At the Jackson Hole conference, Fed Chairman Jerome Powell hinted that it might be time for a policy adjustment, which sparked expectations of future rate cuts. The U.S. dollar index reacted with a sharp drop and is currently fluctuating around 100. With a September rate cut becoming widely expected, the official start of the rate cut trade is likely to improve overall market liquidity, providing a boost to crypto assets,” Kan told BeInCrypto.

30-Day Historical Volatility

According to the report, September will be extremely volatile, with Bitcoin’s 30-day historical volatility surging to 70%. This indicator measures the volatility of an asset’s price over the past 30 days, reflecting how much its price has fluctuated during this period.

Bitcoin’s volatility is now almost double what it was last year and is close to its peak in March, when BTC hit an all-time high above $73,000.

Ethereum (ETH) volatility has also increased, surpassing March levels and Bitcoin levels, driven by ETH-specific events such as Jump Trading liquidations and the launch of an Ethereum ETF.

BTC Implied Volatility by Expiry

Since the beginning of September, Bitcoin’s implied volatility (IV) has increased after falling in late August. The IV indicator measures the market’s expectations of future price volatility based on current options trading activity. A higher IV suggests that traders expect greater future price volatility, although it does not specify the direction of that volatility.

Notably, short-dated option expirations saw the most significant growth, with options expiring on September 13 jumping from 52% to 61%, exceeding the month-end contract. For the uninitiated, when short-term implied volatility exceeds longer-term indicators, it signals increasing market stress, a so-called "inverted structure."

Risk managers often view inverted structures as a sign of heightened uncertainty or market stress. As such, they may interpret it as a warning to reduce risk in their portfolios by reducing exposure to volatile assets or hedging against potential downside risk.

"These market expectations are in line with last week's US jobs report, which dampened hopes for a 50 basis point rate cut. However, the upcoming US CPI data could still affect the likelihood of a rate cut," Kaiko researchers noted.

Trading Volume

The current market volatility is also highlighted by the Bitcoin volume chart, which indicates an increase in trader participation. Cumulative trading volume is approaching a record $3 trillion, having grown by nearly 20% in the first eight months of 2024 after reaching its last peak in 2021.

Bitcoin investors have traditionally viewed rate cuts as a positive market catalyst. However, the market’s interpretation of a larger-than-expected rate cut remains a concern. 10X Research founder Markus Thielen warned that a 50 basis point rate cut could be seen as a signal of urgency, potentially triggering an exit from risk assets like Bitcoin.

“While a 50 basis point rate cut by the Fed would likely represent heightened market concerns, the Fed’s primary focus will be on mitigating economic risks rather than managing market reactions,” Thielen said in a note to clients.

In addition to rate cut speculation, other factors causing volatility in the cryptocurrency market include the upcoming U.S. election. According to BeInCrypto, the debate between Donald Trump and Kamala Harris is expected to cause volatility, especially in Bitcoin and Ethereum.