Bitcoin - Crypto investing and trading discussion

Bitcoin Weakness Tracking Seasonality. September Bullseye Buy Again?



After many years as a crypto and Bitcoin skeptic I teamed up last year with Adrian Zduńczyk, CMT @crypto_birb to study Bitcoin seasonal patterns and trends. Our “Seasonality of Bitcoin” white paper came out September 26, the day of the average annual seasonal low. With $BTC continuing to track its seasonal pattern I would not be surprised if the original cryptocurrency settled into another textbook September seasonal low buy point this year as well

Last year BTC’s September low was a bullseye buy. Bitcoin nearly tripled from the September low of about 25,000 to the high this March just shy of 74,000. Take a look at your favorite technical chart and you can see how BTC has struggled to break above this 70K resistance level, which is only slightly higher than the old November 2021 highs.

So don’t be alarmed by recent weakness and volatility. This is just the usual historical seasonality when stocks and BTC drift sideways, chop, flop and suffer normal pullbacks until they tend to find support in late-summer or early-autumn.

 

Not All Crypto is Created Equal
Fri, Oct 25, 2024

In the crypto space, Bitcoin and Ethereum are considered two of the most credible with market caps of $1.3 trillion and $300 billion, respectively. While there is a tendency for many investors/speculators to lump the two together as highly correlated to each other, that has been far from the case over the last several months. Until mid-summer, Bitcoin and Ethereum followed similar paths, but since then, the paths of the two have diverged. The chart below shows the YTD performance of both cryptos and as recently as July 15th, both were up an identical 50% YTD. Since then, though, Ethereum has given up most of its YTD gains while Bitcoin has added modestly to its rally.



Given the divergence between the two, the ratio of bitcoin to Ethereum has widened to just under 27 which is a level not seen in more than three years. As shown in the chart below, this is still half of where the ratio was in early 2021 (it was even higher than that in 2000), but in the short term, Bitcoin has become the "Mag 1" of the crypto space.

 

Bitcoin Cup and Handle Breakout
Wed, Nov 6, 2024

Last week we published a Chart of the Day for subscribers highlighting the multi-year cup and handle pattern that bitcoin had formed and its similarities with gold's (GLD) technicals.

On the back of President Trump's victory last night, bitcoin's price has now spiked more than $6,000 to trade at new all-time highs above $75,000. The post-election move looks like a clear breakout above all prior resistance levels. From a technical perspective, this breakout essentially marks the end of the cup and handle and the beginning of the post-cup and handle leg higher. Going forward, technicians will be looking for bitcoin's prior all-time highs in the low $70,000s to now act as support.

 

Bitcoin Approaches $100K
Thu, Nov 21, 2024

Bitcoin's relentless rally has pressed on. In the past 24 hours, the world's largest crypto has surpassed the $98,000 mark for the first time ever as it closes in on the $100,000 milestone. As shown below, after trending lower from the end of the first quarter through late summer, Bitcoin hit a low on September 6 and finally broke out of that downtrend by mid-October with a parabolic move upwards after the election. Currently, the crypto is up over 80% from that September low.



Bitcoin has seen a lot of big green candles in the past few weeks. To gauge how it has traded during the day, below we show an intraday composite of Bitcoin's action since Election Day a little over two weeks ago. This is essentially the average 24-hour path that Bitcoin has taken since Election Day. We have shaded in gray the period from 9:30 AM ET to 4 PM ET, which represents regular trading hours for US equity markets. As you can see, Bitcoin has been surging when the US stock market has been open outside of a slight sell-off from 2-4 PM ET. Is this because of all the new Bitcoin ETF buying that has been happening lately?



The surge in Bitcoin prices has also come at a time when seasonality hasn't exactly been at its best. In the second chart below, we show the average path of Bitcoin throughout the year for all years since 2015, over the past five years, and this year. As shown, this year in March and the second half of May, Bitcoin bucked seasonal trends as it saw much stronger runs versus a historical seasonal pattern in which prices have tended to fall. That parallels with this month in which prices have absolutely soared, whereas in the past, Bitcoin has tended to move lower in November before rebounding through the holidays. In fact, as the first days of December approach, forward one month and three month seasonality is reaching some of its strongest readings of the year. As shown in the dials below, forward one month historical median seasonal returns rank in the 85th percentile of all days of the year and forward three month returns are even better, just shy of the top decile of readings. Of course, seasonality is no guarantee of future price movements, and the recent rally already leaves Bitcoin very overbought.

 

Bitcoin $BTC Tracking Seasonal Trend

Bitcoin tracking seasonal trend since full year after CME futures began trading. Set up for Feb-May bull run. Picked up my $IBIT position 10/31.

 

What’s Next for Crypto?


Digital assets had another great year in 2024, led by strength in Bitcoin and ETF inflows, catalyzed further by the new administration. However, as we enter more volatility in February of 2025, the prospect of higher prices now appears to be in question. Bitcoin hovers around 22% below its all-time high, but other major digital assets are significantly lower. Ethereum, the second largest cryptocurrency by market cap, is nearly 56% below its all-time high, and Solana, the sixth largest and likely next to be seen in an ETF wrapper sits even further below highs. This newfound volatility will provide a real-time test to the infrastructure built by issuer firms to handle outflows from digital asset ETFs and the impact on the market, a trend we have yet to see play out with total assets at these levels.

Despite the drawdowns, there are a number of analysts and market strategists still very bullish on the cryptocurrency space. After all, despite more than a 100% gain the past two years in a row, Bitcoin saw corrections of 20-30% multiple times throughout 2023 and 2024. Those would be considered major declines in the stock market but are a feature, not a bug, of digital assets.



Sources: Carson Investment Research, Forbes, Saxo, Individual firm’s websites

As you can see in the chart above, there are not many firms that were willing to publish negative price predictions for Bitcoin this year. Many are also doubling down with the recent correction and reaffirming their higher views. We are not going to make a prediction either (sorry if you were expecting one!) but can point you to a number of resources from Bitwise, Van Eck, Franklin Templeton, and Fidelity to see a range of views.

Crypto ETF Filing Craze
The latest crypto ETF development following the election has been a surge in applications for ETFs beyond Bitcoin and Ethereum (or in some cases variations) that range from reasonable to hopeful, to hail Mary. There are at least 45 different applications for new ETFs since the new administration took office. These products include leverage, options, and tracking digital assets ranging from established (XRP, Solana, Cardano) to meme coins that have only recently been launched with near zero utility (Melania, BONK).

While more tools via the ETF wrapper are generally a good thing for investors, at a certain point they can become a risk. The SEC went to great lengths to gauge liquidity, market manipulation potential, and security when analyzing Bitcoin and Ethereum ETFs. Many of these new proposed products have significantly lower liquidity, include futures trading, and have higher (typically offshore) exchange concentration than existing products, not to mention security issues. This will bring new risks to the ETF wrapper in the US that we generally have not seen yet, should they get the green light. With new risks comes an increased need for proper vetting and due diligence of these products and others, a challenge you can be assured we at Carson are up for.