After a surprise rally in September, Bitcoin and cryptocurrency investors are optimistic that October could pave the way for record highs in the fourth quarter.

Bitcoin Unusually Closes September in the Green Zone

Bitcoin posted its best monthly performance since May, gaining 7.7% in September, typically its weakest month. Despite the strong finish, Bitcoin rose just 2.5% in the third quarter as it struggled to break out of the range it has been stuck in since March.

The second-largest cryptocurrency, Ethereum, also showed resilience in September, up over 3% despite closing the third quarter down over 20%. Despite these gains, the path to new highs for both cryptocurrencies is unlikely to be smooth. Bitcoin continues to face supply pressures from government assets in the US and Germany, as well as repayments to creditors following the collapse of the Mt. Gox exchange.

The upcoming US presidential election is also keeping traders on edge. Federal Reserve Chairman Jerome Powell recently hinted at further rate cuts but said there was no clear policy direction, adding to market uncertainty. “Liquidity remains weak across both crypto and traditional markets, leaving room for sharp changes in volatility if macro events or regulatory news trigger sudden shifts,” according to James Davies, CEO of Crypto Valley Exchange.

However, October has historically been one of the strongest months for BTC. Known as “Uptober” in crypto circles, Bitcoin has closed every October since 2013 higher with an average return of around 23%, except for two. Many investors believe that this month will create a positive feedback loop for BTC and other cryptocurrencies as liquidity returns to the markets and companies prepare for year-end earnings.

David Duong, head of institutional research at Coinbase, noted that macroeconomic factors have largely influenced crypto performance in recent months, and this trend is expected to continue. Interest rate cuts, increased inflows into BTC ETFs, and election clarity are seen as potential drivers for Bitcoin’s price in the coming months.

However, it’s not just the Fed’s policies that are important. Investors are also keeping an eye on the People’s Bank of China. Duong said the Fed’s rate cuts could pave the way for other central banks to adopt more stimulating policies, which could further boost risky assets like Bitcoin.

Despite its difficulties, Bitcoin has gained 47% since the beginning of the year, while ETH has gained 10% in the same period.

*This is not investment advice.