Why should I buy Bitcoin in October

Why should I buy Bitcoin in October

one of Bitcoin‘s (BTC -0.13%) The worst-performing months in history are over. Since the inception of cryptocurrency, the beginning of September has usually meant that Bitcoin is on its way to the downside – and this September was no different. During the month, the world’s most valuable cryptocurrency sank about 3%. Surprisingly enough, this was actually the best Bitcoin in September since 2016.

While bitcoin usually cools down with the onset of fall, he doesn’t seem to care that cold weather awaits us because October, November, and December tend to be some of the best performing months.

During the existence of Bitcoin, the month of October has produced an increase of about 27%, and Bitcoin has recorded a decline in only three of the past ten years. These numbers make October his third best performing month. Even better, November is the best performing month for bitcoin, with an average increase of nearly 40%.

If I may speculate a bit, earlier patterns will likely be repeated. Bitcoin’s decline during 2022 was mainly due to the increasingly unfavorable economic environment surrounding risk assets. As the Federal Reserve raises interest rates to fight inflation, investors everywhere are taking their money and putting it in safer assets.

The last increase in interest rates was in September, with a 0.75% increase – the third increase of this size this year. It would be safe to assume that until inflation is under control and the Fed stops raising interest rates, an asset like bitcoin or tech stocks won’t see any price gains.

Bitcoin, inflation and interest rates

It has taken some time (nearly 10 months and four rounds of rate hikes), but there are encouraging signs that the Fed’s approach to fighting inflation by raising interest rates is having the desired effect. When interest rates rise, the economy slows down, consumers spend less, businesses borrow less, the housing market typically dwindles, and inflation eventually slows.

Based on some factors, there is speculation that the Federal Reserve may switch from tightening monetary policy – meaning that assets like Bitcoin may become more desirable.

In a speech in Phoenix this week, New York Federal Reserve Chairman John Williams was carrying some much-needed news revolving around supply chain issues and inflation. He believes that due to current strategies, inflation should drop to around 3% by next year. That’s not the 2% the Fed’s target, but it would still represent a significant advance, given that inflation is stabilizing at around 8% today.

The fight against inflation is a kind of balancing act. If the Fed raises interest rates too much, a recession may occur. If interest rates are not raised enough, inflation will not be contained. Based on how the market has responded to previous interest rate hikes, it appears that central banks are now enjoying the possibility of lowering or not raising interest rates as much as an investor expects.

The Reserve Bank of Australia has already followed this course. In a surprising move last week, the bank raised interest rates by just 0.25%, a far cry from the last six hikes of 0.5% each. He didn’t rule out more hikes, but during the period when prices have been raised every few months, the decline in the magnitude of the increase is welcome news.

Bitcoin could be the best days ahead

There’s no other way to put it: 2022 has been tough. Since the November 2021 highs, bitcoin has fallen by more than 70%. However, if there is really some light at the end of the inflation tunnel, we should expect more risky assets like Bitcoin to eventually find some relief.

At the bottom, of course, there is more to be achieved. Investors should not make long-term decisions based on short-term events, but October could shape up like most other Octobers in Bitcoin history. Going in at today’s prices looks as if it could reduce risks and provide the biggest potential rally, especially if the Fed starts to change its approach.

RJ Fulton He has positions in Bitcoin. Motley Fool has positions in Bitcoin and recommends them. Motley Fool has a disclosure policy.

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