By Shaw, Golden Finance

In the early morning hours of September 26th (Beijing time), the cryptocurrency market suffered another significant blow. Bitcoin fell below the critical support level of $110,000; Ethereum plummeted below $3,900, hitting a seven-week low; and Solana dropped 7.2%. Over $140 billion in market capitalization evaporated from the cryptocurrency market. Nearly 250,000 individuals were liquidated, suffering losses exceeding $1.1 billion, and $1.7 billion in long positions were forcibly liquidated. This past Monday afternoon, the cryptocurrency market experienced a flash crash, with major assets experiencing rapid declines. Within an hour, the total liquidation across the network reached $1.026 billion, of which approximately $1.007 billion was in long positions.

The crypto market suffered a series of significant setbacks in just one week, casting a shadow over the coming month of September. Is the "September curse" of cryptocurrencies repeating itself? What will the market trend be like in the fourth quarter? Let's take a brief look.

1. Will the double decline this week cause the "September curse" to happen again?

1. What is the "September Curse"?

The "September Curse" refers to the fact that in the historical price data of the cryptocurrency market (especially Bitcoin), the average return rate in September is usually negative and the decline is significant, which leads to a seasonal anxiety.

Bitcoin fell against the US dollar every September for six consecutive years between 2017 and 2022. While this trend led many investors to believe that seasonal factors significantly influenced crypto market performance, this assumption was disproven in 2023 and 2024.

2. Cryptocurrency market performance this week

The cryptocurrency market has been experiencing a slight uptick since the start of September, but volatility has gradually increased since the latter half of the month. The cryptocurrency market has suffered two major setbacks since the start of this week. Monday's flash crash resulted in $1.026 billion worth of liquidations, of which approximately $1.007 billion was in long positions. Early this morning, the crypto market suffered another significant blow, with Bitcoin falling below the critical support level of $110,000, dropping nearly 4%. Ethereum fell below $3,900, plummeting over 7% intraday to a new seven-week low, continuing the sharp correction seen in cryptocurrencies this week. Solana fell 7.2%, extending its six-day losing streak. Over $140 billion in market capitalization has been wiped out across the cryptocurrency market. Nearly 250,000 individuals worldwide were liquidated, losing over $1.1 billion, and $1.7 billion in long positions were forcibly liquidated.

Historical data shows that September is typically one of the weakest months for risk assets. For both US stocks and cryptocurrencies, average returns in September are significantly lower than the annual average. It wouldn't be surprising if the cryptocurrency market maintains current price levels through September and into the fourth quarter.

2. What are the reasons for the decline in the cryptocurrency market this week?

1. Institutional capital withdrawal may intensify selling pressure

The cooling of institutional capital inflows into the crypto market has exacerbated selling pressure. Coinglass data shows that US-listed spot Ethereum ETFs have experienced net outflows for four consecutive days since Monday, with investors withdrawing over $547 million. Meanwhile, US spot Bitcoin ETFs have seen net outflows three times this week, totaling over $479 million.

The continued net outflow of funds from spot Bitcoin and Ethereum ETFs indicates weakening institutional demand, which could lead to a longer period of price correction. Institutional investor demand is one of the main drivers of the current crypto bull market, and the current cooling of institutional capital inflows may slow the upward momentum of the crypto market.

2. The DAT narrative is cooling, and the “mNAV premium” is disappearing.

The current Digital Asset Treasury (DAT) craze has subsided, with the flywheel effect and demand for crypto assets declining. Data shows that the market-to-net asset value (mNAV) ratios of most DATs have essentially converged to parity, with ETH DAT experiencing the most significant compression since May. This suggests that the "DAT premium" is fading. The weighted average mNAV of ETH DATs has fallen from a high of over 5x in early summer to below 1x in early September. DAT trading volume peaked in mid-August and declined in September, indicating that the DAT narrative has faded and valuations have re-anchored to net asset value (NAV).

Furthermore, recent regulatory measures have added further uncertainty to the future development of the DAT model. The U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (Finra) are reportedly investigating unusual trading patterns at over 200 companies that have announced digital asset treasury strategies, with their stock prices experiencing significant increases prior to the announcement of their digital asset purchase plans. In conversations and correspondence with the companies involved, regulators have specifically highlighted concerns about potential violations of Regulation Fair Disclosure. This regulation requires listed companies to disclose material information uniformly to all market participants and refrain from selectively disclosing insider information that could be used for trading.

All signs indicate that the DAT narrative is cooling down. Simply relying on DAT strategy companies to purchase crypto assets to stimulate market prices is a model that is doomed to not last long.

3. The future economic situation is unclear, and the Fed's expected policy is causing concerns.

Recently, the U.S. GDP growth rate exceeded expectations and the number of first-time unemployment claims decreased. The strong data increased the uncertainty of the Federal Reserve's future interest rate cut path, and the market expectations for an October interest rate cut have cooled.

The deepening divisions within the Federal Reserve over further interest rate cuts reflect the policy challenges facing officials in balancing inflation risks with employment concerns. Kansas City Fed President Schmid and Chicago Fed President Goolsbee, two voting members of the Federal Reserve's monetary policy committee this year, have expressed concerns about aggressive rate cuts. In contrast, Vice Chairman for Financial Supervision Bowman and new Fed Governor Milan have pushed for faster rate cuts.

The Federal Reserve just cut interest rates for the first time this year last week, but the path of subsequent cuts remains a matter of debate. In his speech on Tuesday, Fed Chairman Powell continued to leave room for further rate cuts, suggesting a cautious approach in a challenging risk environment. Powell stated that interest rates "remain moderately constrained" and face the dual risks of rising inflation and falling employment. He reiterated that it's reasonable to expect tariffs to be a one-time price increase, emphasizing the need to ensure their impact doesn't persist. Furthermore, Powell gave no indication of whether he would support a rate cut next month.

The uncertainty of economic conditions has exacerbated the divergence in the Federal Reserve's expectations for future policies, triggered market concerns about the direction of subsequent interest rate decisions, and further slowed the upward trend of risky assets such as cryptocurrencies.

4. “Black swan” events may trigger market panic

This week, hacker attacks on two high-profile projects triggered a sharp drop in the value of related tokens. On September 23rd, security firm Cyvers' systems detected $11.3 million in suspicious transactions involving UXLINK, suggesting a theft. SlowMist Yuxian subsequently confirmed the UXLINK hack in a post on the X platform. After stealing the funds, the hackers issued an additional 1 billion UXLINK tokens on the blockchain. Following the attack, UXLINK's value plummeted. Yesterday, GriffinAI officially announced that the GAIN token on the BNB chain had suffered a major security incident. The attackers successfully minted 5 billion GAIN tokens on the BNB chain and then sold them, triggering a panic sell-off in the market. The GAIN token's price plummeted by over 90%, severely impacting its subsequent price support.

These two hacker attacks on star project tokens may have triggered a "black swan" effect, exacerbating market panic and affecting the overall trend of the cryptocurrency market to a certain extent.

3. How will the market trend be in the next four quarters?

Although the cryptocurrency market suffered a heavy blow this week, the market's overall judgment on the crypto bull market has not changed significantly, and many parties are still bullish on the trend of the crypto market in the fourth quarter.

1. Coinbase Research expects the crypto market to continue to strengthen in the early fourth quarter due to resilient liquidity, a favorable macro backdrop, and supportive regulatory developments, with Bitcoin expected to outperform. Demand for DAT technology is expected to continue to support the crypto market, even as the industry enters a competitive "player versus player" phase. Coinbase also emphasizes that historical monthly seasonality (particularly the "September curse") is not a significant or reliable predictor of crypto market performance.

2. Grayscale's latest research report indicates that fourth-quarter crypto returns may be driven by a number of distinct themes. First, the relevant US Senate committee has begun work on crypto market structure legislation. This represents comprehensive financial services legislation for the cryptocurrency industry and could serve as a catalyst for its deeper integration with traditional financial services. Second, the US SEC has approved universal listing standards for commodity-based exchange-traded products (ETPs). This could increase the number of crypto assets available to US investors through ETP structures. Third, all else being equal, crypto assets are expected to benefit from Federal Reserve interest rate cuts (as rate cuts reduce the opportunity cost of holding non-interest-bearing currencies and support investor risk appetite).

3. Tom Lee, co-founder of Fundstrat and chairman of BitMine, stated that Ethereum is a “truly neutral chain” that will be favored by Wall Street and the White House. Lee further explained that he has observed the White House and Congress becoming more supportive of cryptocurrencies under the Trump administration, and is now primarily turning to Ethereum. Lee stated that he sees the possibility of Ethereum entering a “super cycle” lasting 10 to 15 years.

4. VanEck reported that over 290 companies currently hold over $163 billion worth of Bitcoin. Given that only 270,000 Bitcoins were mined during the same period, corporate demand is currently growing at approximately 4.3 times the rate of Bitcoin production. Taking into account Bitcoin held by ETPs, other funds, and governments, total institutional demand is growing at approximately 6.7 times the rate of production. The accelerated pace of institutional investors' Bitcoin purchases indicates a growing appreciation for its deflationary supply, which gives it unique store-of-value properties.

5. Bitwise Asset Management stated that previously, digital asset treasury strategies were primarily centered around Bitcoin, but now companies are allocating large amounts of ETH. Analyst Max Shannon noted that ETH treasury is no longer a fringe topic but is becoming a structural pillar of the cryptocurrency capital market. ETH is not just a hedging or speculative tool, but a programmable financial asset that connects corporate financing with the on-chain economy.

6. Billionaire Mark Cuban said that companies holding Bitcoin as treasury assets are an alternative hedge against fiat currency risks.

7. Cryptoquant analyst Axel Adler Jr. released a market analysis stating that the market has entered a corrective range-bound pattern, and the current rebound is more of a temporary uptick than a trend restart. Within the channel, key support lies at $109,500. A hold above this level and a move back above zero would re-establish a bullish trend and potentially lead to a retest of $117,700.