This is an interesting visualisation of Bitcoin returns monthly from 2014-2017 as a ‘heatmap’ -
https://flic.kr/p/25Eedr4 (sorry I couldn’t get the image to post here).
The peak monthly returns for those 4 years are nearly always in May/June and Oct-Dec, which reminded me of that old stock market adage from England about seasonal returns being lower in the hot summer months - “Sell in May and go away, come back on St Leger’s Day” (mid-Sept)!
While bitcoin doesn’t have a hundred years of data to look back on like the stock markets, it is interesting to look at the average monthly returns for the 4 years 2014-2017 as follows:
Jan -10.25%, Feb +3.5%, March -10.25%. } 4-yr avg return Jan-March -5.75%/mth
April +5.5%, May +28.5%, June +12% } 4-yr avg return Apr-June +17%/mth
July +2.75%, Aug +7.5%, Sept -5% } 4-yr avg return Jul-Sept +1.75%/mth
Oct +20.25%, Nov +21.25%, Dec +14.75% } 4-yr avg return Oct-Dec +18.75%/mth
So if you were looking to seasonally trade bitcoin over those 4 years, then the returns before costs for being in bitcoin for the best 6 months of Apr-Jun and Oct-Dec would have been +17%/mth vrs being out of bitcoin the worst six months of Jan-March and Jul-Sept when the overall return was -2%/mth. And interestingly the bitcoin returns so far in 2018 of -25% in Jan and +13% in Feb and -38% in March with an avg Jan-Mar 2018 return of -16.75%/mth, has followed the general trend for bitcoin in those 3 months and the avg -5.75%/mth return seen in the previous 4 years.
So are we onto something here with the idea of buying bitcoin at the start of April and selling at the end of June and buying again at the start of October and selling at the end of December to maximise returns? Well a strong word of caution first, as detailed in this excellent Forbes article from April 2013
https://www.forbes.com/sites/rickferri/2013/04/08/busting-the-sell-in-may-and-go-away-myth/#402a202f8808 looking at the myth of improving returns from the Stockmarket from holding stocks the 6 mths from Nov-Apr and cash the 6 mths from May-Oct. Yes the average returns on the Dow Jones from 1950 were 7.5% from Nov-Apr vrs 0.3% from May-Oct, but a definitive ‘mythbuster’ study from CXO Advisory Group showed the return on $1 invested in the US Stockmarket for 140 yrs from 1871-2011 under 3 scenarios was this:
1. Hold stocks Nov-Apr and hold cash as Treasuries May-Oct - $1 grew to $1,000
2. Hold cash as Treasuries Nov-Apr and hold stocks May-Oct - $1 grew to $75
3. Holding stocks all year round with no seasonal cashing out - $1 grew to nearly $200,000 **** HODL ANYONE!!
As a believer in bitcoin and blockchain and how it is going to revolutionise finance and most industries and the world as the Internet 3.0 is increasingly adopted by the general population over the next 10-15 years, I tend to agree with the long-term investment advice at the end of the Forbes article which paraphrased for the Crypto world is to ‘Hold a diverse portfolio of bitcoin and quality crypto assets based on your needs, and rebalance occassionally!’
So what do people think of the idea of a ‘seasonal’ flavour to bitcoins returns - three months on, three months off?
Do you think the start of April this year is a good time to buy bitcoin, and that it will match the average +15%/mth returns for Apr-Jun 2013 to 2017 in Apr-Jun 2018 - or not?
And do you think the Stockmarket data from CXO Advisory showing 99% better long-term returns from holding an index of stocks all year round vrs holding stock for the 6 months of the year with the best avg returns and holding cash/Treasuries the other 6 months is going to be applicable to crypto investing long-term too, and is that a reason to just buy bitcoin and quality alts at the best price you can and hodl long-term with rebalancing rather than trying to time the market by moving your investment money in and out of crypto using seasonal or other popular trading methods?
Comment and opinions very welcome.
