At the end of September, following a broad market rally involving major global stock indices, Bitcoin once again surpassed $66,000 before retreating again. Some analysts predict a target of $100,000 for the leading cryptocurrency by the end of the year, a forecast also influenced by expectations that Bitcoin will mirror its past market cycles following the Halving, as well as the possible effect of the outcome of the American presidential elections. Added to this is the fact that historically the last quarter is when Bitcoin has typically recorded its best performances.
This article will therefore delve into this possible year-end bias, trying to understand what can be expected from the price of Bitcoin, and if there truly exists a market edge that can be exploited with systematic trading.
Summary
- Historical Analysis of the Average Annual Movements of Bitcoin
- The effect of the Halving on Bitcoin: is a bull run coming?
- Final considerations and impact of political and macroeconomic events on the price of Bitcoin
Historical Analysis of the Average Annual Movements of Bitcoin
First of all, it can be observed how the fourth quarter of the year (Q4) is historically the one with the best average percentage returns (source Coinglass.com), which are around 81% (with a median of 31%), compared to an average of 56% in Q1, 27% in Q2, and just 6% in Q3.
Figure 1 – Quarterly percentage returns of BTC
This seems to confirm the end-of-year bull trend for Bitcoin. Analyzing the percentage returns in individual months, it is evident how October and November have often been positive months for Bitcoin, with October in particular showing both the average and the median around 21% and as many as 9 positive occurrences out of 11 (2013-2023): data that have fully earned it the nickname of UPtober.
Figure 2 – Monthly percentage returns of Bitcoin
To delve deeper into this possible end-of-year edge, the Bias Finder will be used, a tool specifically developed for the students of the Unger Academy, capable of analyzing recurring behaviors in the markets through the average price trend.
Using the BTCUSDT spot cryptocurrency pair as a tool, with data starting from January 2018 and a 15-minute time frame, it is possible to evaluate different time horizons: daily (Intraday), weekly (Weekly), monthly (Monthly), or yearly (Yearly). In this case, the yearly one will be evaluated, which provides a chart showing the trend of the BTCUSDT pair, expressed as the average monetary excursion during the year (Figure 3).
Figure 3 – Average monetary excursion of BTCUSDT during the year
It is immediately appreciated from the chart provided by the Bias Finder that October is on average a very positive month, while November does not seem to be as robust in the results: the reason is certainly linked to the fact that the data available for BTCUSDT starts from 2018, and as seen also from the table in Figure 2, from 2018 to today November has closed more times in negative than in positive.
If you want to delve deeper into the analysis, the Bias Finder allows you to overlay on the chart the average trends of the individual years available (Figure 4 and 5).
Figure 4 – Average monetary excursion of BTCUSDT annually: 2020, 2021, 2023
Figure 5 – Average monetary excursion of BTCUSDT annually: 2018, 2019, 2022
It can be seen how, in 2020, 2021, and 2023, there was indeed a bull trend in the last quarter of the year, while in 2018, 2019, and 2022, the performance was flat or slightly negative: this does not support the existence of a true market edge that can be effectively exploited in systematic trading.
One might still consider a buying strategy at the beginning of October and selling by December, or a system that only goes long during these three months. However, the statistical significance would still be low, given the limited historical data available, so it is preferable not to go further.
The effect of the Halving on Bitcoin: is a bull run coming?
Assuming therefore that there are no conditions to develop a trading strategy, one could still estimate the possible trend of Bitcoin prices from now to the end of 2024, based on its historical trend in post-halving periods, while remembering that it is not automatic that the same scenario seen in the past will occur in 2024.
It is well known, in fact, the regularity with which in the past the completion of a Halving has marked the beginning of significant bull movements of Bitcoin. Unlike the past, however, the one at the end of April 2024 has stood out from previous events due to a series of unique factors, the consequences of which are yet to be evaluated.
The global macroeconomic conditions, such as inflation in major economies and the monetary policies of central banks, also influence the cryptocurrency market. A potential economic crisis or turbulence in traditional financial markets related to the geopolitical situation could see an increase in demand for Bitcoin as a safe haven asset, positively influencing its price.
As mentioned, there is the expectation of seeing, in the months following the Halving, behavior similar to the past: that is, a period of about 160-170 days of lateral movement, and then breaking the previous all-time highs and triggering an important “bullrun.” Analyzing the situation on the date this article was written, which is October 9, 2024, it is noted that 170 days have already passed since the last Halving (blue rectangle in Figure 6) and Bitcoin has not yet broken the previous all-time high of about $73,000.
Figure 6 – Post Halving 2020 vs 2024 Comparison
One can then find estimates like the one shown in Figure 7 (source Bitbo.io), where the price cycle seen in the last 4 years (approximately the period of a Halving) is taken and repeated for the next 4 years, under the assumption that the cycle indeed repeats. It is clearly a pure estimation exercise, and its statistical significance is relative, so it should be taken for what it is, remembering that only the market can say what the true trend of Bitcoin will be.
Figure 7 – BTC price forecast based on the repetition of the Halving cycle
Final considerations and impact of political and macroeconomic events on the price of Bitcoin
In conclusion, it has been observed how the theoretical bull trend of Bitcoin in the last three months of the year does not have a statistical basis solid enough to be exploited for systematic trading.
Despite this, expectations for a new all-time high by the end of the year are high, driven by the regularity with which Halvings in the past have marked the beginning of significant bull movements, but also by global macroeconomic conditions and the unstable geopolitical situation, which could see an increase in demand for Bitcoin as a safe haven asset. The outcome of the American presidential elections could also generate volatility and act as a catalyst for the beginning of a new bull cycle.
The trading weeks of the current year are now few, and all that remains is to observe what will happen at the end of 2024, to confirm or not these evaluations.
Until next time and happy trading!