Institutional Money Rewrites the September Rule Book With Crypto ETFs

The resurgence of Bitcoin ETFs has sparked renewed interest in whether they can defy the traditional "September curse" that has historically seen the S&P 500 underperform. As of early September 2025, the market witnessed a record $741.5 million in single-day inflows into Bitcoin ETFs, marking the highest since mid-July. This surge, part of a three-day inflow totaling over $1.1 billion, underscores the growing institutional appetite for crypto exposure and hints at a potential shift in the seasonal performance of the U.S. stock market.

The "September curse" is a documented phenomenon where the S&P 500 has historically experienced a decline, often attributed to seasonal trading patterns, portfolio rebalancing, and reduced market participation. However, the introduction and growth of spot Bitcoin ETFs, particularly those such as iShares Bitcoin Trust (IBIT) and Fidelity Wise Origin Bitcoin Fund (FBTC), have altered the landscape. As of July 2025, these leading ETFs held over 300,000 BTC, representing approximately 1.5% of the total Bitcoin supply. The accumulation of Bitcoin by institutional investors through ETFs has not only tightened the circulating supply but also created a sustained upward pressure on Bitcoin’s market price.

Bitcoin ETFs have demonstrated a unique ability to influence market dynamics due to their direct holdings of BTC and their capacity to drive institutional capital into the crypto market. The return-to-fee ratio, a metric that evaluates the efficiency of ETFs by comparing their one-year return to their expense ratio, further highlights their appeal. IBIT and FBTC, for example, have posted impressive returns of 54.5% and 54.3%, respectively, with relatively low expense ratios of 0.12% and 0.25%, outperforming higher-fee peers like Grayscale Bitcoin Trust (GBTC). This efficiency has made them preferred vehicles for institutional investors seeking exposure to Bitcoin while minimizing costs.

The institutional involvement through ETFs has also contributed to a new level of market stability and liquidity. Daily trading volumes for top Bitcoin ETFs have reached hundreds of millions of dollars, with tight bid-ask spreads that facilitate efficient entry and exit for both retail and institutional investors. This liquidity has attracted traditional financial institutions, including pension funds and family offices, to allocate capital into crypto assets through ETFs, a move previously hindered by regulatory uncertainties and operational complexities.

The recent inflows into Bitcoin ETFs contrast with the traditional September pattern, as the S&P 500 has historically seen negative returns in eight out of the last 12 Septembers. However, as of early September 2025, the S&P 500 had already risen 2.3% for the month, suggesting the curse might not manifest this year. The confluence of factors—Federal Reserve rate cut expectations, ETF inflows, and strong institutional buying—has created a bullish environment that could see the September curse broken for the first time in years.

In addition to Bitcoin, Ethereum ETFs have also shown signs of recovery after a six-day outflow streak. With combined inflows of $200 million on September 9–10, Ethereum ETFs signaled renewed institutional interest, albeit with a more complex dynamic compared to Bitcoin. The demand for Ethereum-based ETFs appeared to be driven not only by speculative interest but also by structured arbitrage strategies involving derivatives markets. This distinction highlights a broader trend in institutional adoption: while Bitcoin ETFs reflect direct spot exposure, Ethereum ETFs are attracting a mix of strategic and speculative demand.

The broader macroeconomic environment has further supported the positive sentiment. Recent data on consumer and producer price indices have led market participants to price in three rate cuts by the Federal Reserve in 2025 rather than two. Historically, October and November have been the strongest months for Bitcoin, averaging 21.9% and 46% returns, respectively. If this pattern holds, the current inflow momentum could carry forward into the fourth quarter, reinforcing the case for Bitcoin ETFs to play a stabilizing and potentially outperforming role in the market.

While the September curse remains a topic of debate, the performance of crypto ETFs has introduced a new narrative—one where institutional capital, driven by Bitcoin and Ethereum, challenges historical seasonal trends. As more investors and institutions allocate capital through ETFs, the traditional market dynamics are evolving, with crypto assets increasingly influencing the broader financial ecosystem. Whether or not the September curse is definitively broken, the growing role of crypto ETFs in the market suggests that the narrative of crypto's underperformance in September may be changing.