Bitcoin Faces September Sell-Off Amid Fed Rate Hike Fears

Bitcoin has kicked off September on a weak note, dropping below $78,000 on its first day. This comes as no surprise to crypto market observers who have dubbed September 'Rektember' due to its historically poor performance.

Looking back at data since 2013, Bitcoin's average loss in September is around 3%. However, the past few years have seen a divergence from this trend, with BTC ending the month with gains. This year, after a strong August where it gained approximately 25%, some market watchers are bracing for a correction or consolidation due to profit-taking.

The Federal Reserve's interest rate policy is also weighing on Bitcoin's short-term outlook. With markets pricing in a 66% probability of a 25 basis point rate hike at its September 16 meeting, investors are factoring in the possibility of further rate hikes later this year. A high-interest-rate environment can tighten financial conditions and support the dollar, negatively impacting demand for risky assets like Bitcoin.

Seasonal pressure isn't unique to the cryptocurrency market; historically, September has been a weak month for stocks as well. The S&P 500's average return since 1975 is negative, making it the only month with this distinction.