A Closer Look At Bitcoin Seasonality

September is the most consistently bad month for bitcoin, but October is the best, with an average return of 22%.

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Since bitcoin was listed on the first exchanges 13 years ago, it has proven an incredible success story, increasing in value from just a few cents to tens of thousands of dollars.

Blockchain analytics website CoinGlass notes: "Since 2011, the cumulative growth of Bitcoin has exceeded 20,000,000%, far surpassing the cumulative growth of 541% for the Nasdaq 100 Index and 282% for major US stock indices. When considering annualized returns, Bitcoin's rate of return stands at 230%, which is 10 times higher than the second-best performing asset class, the Nasdaq 100 Index."

However, those incredible price increases are interspersed with sharp drawdowns, and periods of relative calm. Bitcoin performs well in certain months, and in certain years in its overall market cycle. At other times, holding can be gut-wrenching.

Does seasonality—the idea that certain times of the year show particular patterns of price movement—give us any clues when those respective periods might occur?

A Closer Look At The Data

Our starting point is CoinGlass's tables of monthly and quarterly returns.

At a glance, it's immediately evident that Q4 tends to be the best quarter, with Q1 and Q3 faring the worst. (It might be some consolation that we're coming to the end of Q3 now.)

Overall 2013 and 2017 saw outstanding returns, and were both years in which a bubble culminated. 2020 also saw very strong returns. The structure of the market in this instance means that the bubble top year of 2021 was not so impressive, though it was still a strong year overall.

What about drilling down to the monthly level?

Bitcoin Month-By-Month

CoinGlass's table shows that September is consistently the worst month for bitcoin, experiencing negative returns in eight out of ten years recorded (the results for this year are discounted, since the month has not ended yet).

October, on the other hand, has seen consistently strong returns. Eight out of ten months have seen BTC increase in price, and the average is +22.3%.

November tends to be a mixed bag. Due to the cyclical nature of bitcoin, bubbles tend to peak in November or December, and bear markets also bottom around the same time. This means those two months are more likely to be either outstanding or awful. There have been six "green" Novembers and four "red" ones, while December has been green four times and red six.

Despite being an overall bad month, September tends to miss the biggest falls. It appears to be a month for corrections, not crashes. In fact, Q3 is generally somewhat mixed but rarely either strongly positive or negative. Out of all the 30% or greater monthly declines, three have occurred in Q1, two in Q2, none in Q3, and two in Q4.

Self-Fulfilling Prophesy

The strong seasonal nature of bitcoin means it can become self-fulfilling. Put simply, if traders believe a month will see good returns, they will buy, pushing the price up.

This year, there is the prospect of ETF approval in the relatively near future to boost traders' optimism. Additionally, 2024 is a Halving year, which traders and investors anticipate keenly due to the reduction in new supply that results.

Best of all? September, that consistently bad month, is almost in the rear view mirror.

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