Bitcoin has displayed a semi-regular cyclicality over the last year. Most months ended in the positive, with the green candles leading the market. Although most months were positive, there are significant differences in the two halves of each month. The push-and-pull pattern continues into the new year. This is bad news for February.
A Look at Monthly Cyclicality through 2021
88% of the 14 previous months saw positive monthly returns. These eight months have seen positive returns mid-month for only three of the last 14 months. Most of bitcoin’s gains have been recorded occurring in the first half of the month, while the second half usually suffered losses.
False Safe Haven: Bitcoin Correlation With S&P 500 Hits ATH| False Safe Haven: Bitcoin Correlation With S&P 500 Hits ATH
CME future expires, which are usually mid-month in nature, usually coincide with these periods of losses and gains. The chart below shows how the CME future expires usually play out from the middle of the month to the next expiry date.
Source: Arcane Research| Source: Arcane Research
A trader who follows this trend for the past one year will make a substantial profit. If they bought digital assets just as the CME Futures expire and sold them at mid-month, that would be a significant profit. The reverse would put a trader in over 50% loss from their initial investment, indicating that timing the CME futures expiry and following bitcoin’s cyclicality could be a favorable strategy.
Bitcoin is not looking good at February’s end
The fact that the cyclicality of the cryptocurrency has continued into 2022 may mean the end for the digital asset’s last week. The political and social issues that have been affecting Bitcoin and all cryptocurrencies, including the Russian invasion of Ukraine, are already causing havoc. This has seen bitcoin’s value plummet to $35,000 and given bears complete control of the market.
BTC recovering above $35K Source: BTCUSD at TradingView.com| Source: BTCUSD on TradingView.com
Bitcoin had experienced 17% growth in the first half February. From mid-month through the month it dropped to 17% growth. Over 12% of losses have already been recorded. Bitcoin could see yet another week’s worth of losses before March arrives. The digital asset may see significant growth between March 1st and mid-month.
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The reasons for this cycleicality are still unknown. The CME future expiry is one of the most compelling arguments in favor. Arcane Research noted that the monthly VWAP price of the digital asset coincides with the month’s maximum pain prices. It is not yet clear if this is why there is cyclicality.
Featured image taken from USA Today.