Disclaimer: This post contains thoughts on crypto, a volatile and risky asset class. It is not investment advice, and you should do your own research. All information is for educational purposes only. Please don’t take risks with money you’re not willing to lose.

Since Bitcoin first garnered global attention in 2013, September has been a consistently losing month. In all but three years has the monthly candle finished green, and average returns over that same time period equate to -3.77%. Despite this, BTC shattered historic expectations and ended overwhelmingly positive (+7.29%) amidst news of rate cuts, ETF options, and Solana Breakpoint.

Rate Cuts

In the much anticipated September Federal Open Market Committee meeting, the Federal Reserve lowered interest rates by 50 basis points (0.50%) - signifying the first expansionary monetary policy in four years. This effectively reduces the federal funds rate to a target range of 4.75% to 5%.

While cuts of 50 bps are generally reserved for times of crisis such as Covid-19, Chairman Jerome Powell noted that the key factor behind the decision was the slowing labor market (as opposed to inflation).

In this instance, inflation has fallen faster than expected while August’s labor market data shows that job growth has substantially slowed. Simultaneously rebalancing their dual-mandate, the beginning of this rate-cutting cycle reflects the Fed’s revised effort to support maximum employment.

Significance

The federal funds rate refers to the interest rate at which depository institutions (i.e. banks, credit unions) lend reserve balances to each other on an overnight basis. This also indirectly affects yield on consumer loans, mortgages, and savings accounts. When interest rates are lowered, borrowing becomes cheaper - encouraging consumer spending. Conversely, lending becomes more expensive - incentivizing consumer investment.

IBIT Options

While Bitcoin has outperformed virtually all asset classes since its inception, it took the SEC nearly a decade to recognize it as a commodity with significant institutional interest. Nonetheless, spot ETFs were approved earlier this year and the record-breaking launch of BlackRock’s IBIT effectively solidified Bitcoin’s mainstream appeal (>$10b inflows in just under two months). With the floodgates now open, the SEC more recently approved options trading for IBIT - likely confirming the same for other filings in the weeks to come.

Significance

Although options have long existed across traditional financial assets, they are a relatively new concept to crypto (circa Deribit).

As institutional participation increases…

1. Macro hedge funds want to be specific about their bets - options enable sophisticated hedging against crypto exposure

2. Large institutions want to ensure there’s no counterparty risk - exchange-traded options run no credit risk as clearing houses manage liquidity

Exposure to such a financial instrument will further mature the asset class, increase mainstream acceptance, and provide a much needed risk management framework in return for reduced volatility.

Breakpoint

Integral to September’s positive sentiment was Solana’s inaugural Breakpoint conference in Singapore. With SOL being this cycle’s fastest horse, anticipation was already high heading into the two-day event, yet builders still managed to go above and beyond. Of the developments, the following were most noteworthy:

• Franklin Templeton announces mutual fund on Solana

• Firedancer now live on testnet (+ mainnet in non-voting mode)

• Coinbase’s cbBTC is coming to SOL

• BONK ETP to be launched in the US

• Kamino to offer spot leverage

• Zeta Markets teases Solana L2

• Société Générale announces SOL support for its EURCV stablecoin

Further confirming my SOL thesis as outlined in “March Madness”, Solana Labs also managed to debut two new consumer-facing products:

• The Seeker - crypto-native mobile device v2

• PSG1 - handheld Web3 gaming device v1

Portfolio Update

Although I haven’t made any drastic changes to my portfolio, WIF has interestingly taken a larger position than months prior as it continues to reclaim some share of dominance against BTC and other similarly-priced alts. With what feels like the second half of the bull run about to kick off, it’s comforting that my largest holding is showing relative strength during these most recent moves. Nothing is ever financial advice, but here’s a message I sent to a close friend curious about my thoughts moving forward…

As such, no buttons will be touched until Bitcoin is reaching new all-time highs ;)