Bitcoin’s September Performance
Bitcoin’s performance in September 2023 was one of its most robust since 2012. Despite a notable drop in interest rates across Europe, the United States, and the UK this past month, BTC’s price was relatively stable and even surged by 4.7%.
This performance mirrors BTC’s strength in 2012 and 2016, with impressive surges of 23.5% and 5.7%, respectively.
As of this writing, Bitcoin is trading at approximately $27,590, a 10% increase from its September lows. Traders are optimistic that this uptrend signals a new phase of rally, with the gradual price upswing from late September persisting into early October and providing a strong start for Q4 2023.
Data from the crypto analytics platform, Kaiko, indicates that BTC remained steady despite relatively high rates. Meanwhile, conservative investors, including institutional entities, are attracted to the US government’s offering of a “risk-free” yield per the Kaiko report.
Safe Haven Investments
It is worth noting that the US government swiftly raised rates throughout 2022 and the first half of 2023 to combat escalating inflation. The regional banks were significantly affected by these rate hikes. Some even filed for bankruptcy in the early months of 2023.
More importantly, many investors chose to invest their capital in seemingly safer havens of the bond and treasuries markets, spurred on by the allure of high-yield but secure interest rates. If not for these attractive yields, these capital inflows would have been invested in the crypto market.
While the US Fed only increased rates marginally (from 5% to 5.25%) in its latest rate change announcement on October 3, inflation in August surged to 3.7%. However, this inflation rate is a remarkable drop from the nearly 30-year peak of 8.2% recorded in September 2022.
Nevertheless, the Federal Reserve’s goal has always been to keep the inflation rate around 2%. Meanwhile, the rise in inflation implies that it is unlikely that the US Fed will announce a rate increase in its next rate announcement.
As is often the case, rate announcements impact the liquidity of cryptocurrencies and the valuations of digital assets, including Bitcoin. For instance, when the Federal Reserve started raising rates in 2022, BTC’s price experienced a significant decline from over $57K in November 2021 to around $17.6K in November 2022. ear.
These rate hikes also affected cryptocurrency platforms and were part of the reasons for the collapse of notable crypto firms like FTX and Celsius.
Fitch Revises Rating For US Treasury Investment
US Treasuries are typically viewed as a secure, risk-free investment due to the backing of the government’s credit. This assurance is due to the government’s timely debt repayment, which it hasn’t defaulted thus far.
However, Fitch Ratings downgraded the US government’s credit rating from AAA to AA+ two months ago. The ratings agency’s reasons were based on its prediction that the country’s economic situation will worsen in the next three years, expressing concerns about the deteriorating governance concerning fiscal and debt-related matters in recent decades.