Bitcoin too Has a Phase of Seasonal Weakness in the Summer

SEASONAL INSIGHTS
Feb 05, 2018

When I heard about Bitcoin for the very first time in May of 2011, it traded at eight US dollars.

As I write this, almost exactly six years later on May 20 2017, it has broken through the USD 2,000 barrier for the first time [ed. note: since then it has streaked even higher].

If I had invested USD 1,000 when I first became aware of it, I would have made a profit of USD 250,000 – the kind of return one can normally only dream of!

Consider though that prior to that juncture, the price had already increased by a factor of 160 within just a few months, as it stood at a mere 5 cents in July 2010.

USD 1,000 invested at that time would have become USD 40 million in less than seven years!

Bitcoin exhibits a pronounced phase of weakness in the summer

In view of such staggering gains, many investors are probably wondering whether they should sell their Bitcoins.

Let us take a look at what the seasonal statistics have to say about that.

The chart below depicts the average price pattern of Bitcoin over the course of a year. The horizontal axis denotes the time of the year, the vertical axis the level of the seasonal index (i.e., the average value of Bitcoin indexed to 100 at the beginning of the year).

Bitcoin, seasonal price pattern over the past 7 years

From June 8 onward, a seasonal downtrend commences. Source: Seasonax 

As you can see, the price of Bitcoin does tend to fall prey to the summer doldrums: in the period highlighted in dark blue from June 8 to October 6, it enters a pronounced seasonal downtrend. 

Optimal seasonal time periods in Bitcoin

 

The average price loss between June 8 and October 6 over the past seven years was 22.18 percent. That isequivalent to a relatively high 55.23 percent annualized.

Just how weak this phase is becomes even more obvious if one compares it to the seasonally strong time period: Bitcoin conversely rose by an average of 494.74 percent between October 6 and June 8. On an annualized basis this is equivalent to a stunning profit of 1,326.86 percent! 

From a seasonal perspective, it is time to sell

In the weak seasonal period highlighted above, losses were recorded in three of the seven years since 2010. These losses reached up to 60.46 percent – in short, the risk is quite substantial.

Thus, from a seasonal perspective, it is now time to sell Bitcoin. Performance in the summer months was to date particularly poor relative to the rest of the year, during which Bitcoin on average delivered extremely strong performance.