For the past year, bitcoin has shown a cyclicality that has been on a semi-regular basis. For most of last year, most months had finished in the positive with green candles dominating the market. However, while most of the months have been positive, there have been significant differences between the first half of the month and the second half. This push and pull pattern has continued into the new year, spelling some bad news for the end of February.
Looking At Monthly Cyclicality Through 2021
Eight months out of the last 14 months have been recording positive returns mid-month. Across these eight months, the returns have not carried on to the end of the month for five months, leaving only three months that saw positive mid-month to end-month returns. Most of bitcoin’s gains have been recorded occurring in the first half of the month, while the second half usually suffered losses.
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These periods of gains and losses usually coincide with the CME future expires which usually occur mid-month. And from mid-month to the next expiry date, the pattern usually plays out as illustrated in the chart below.
BTC monthly cyclicality shows interesting pattern | Source: Arcane Research
Following this pattern for the past year would put a trader in significant profit over the past year. That is if they purchased the digital assets when the CME futures were expiring and subsequently sold the next mid-month. 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.
February End Not Looking Good For Bitcoin
Given that this cyclicality has carried on into 2022, then the last week of February may see the digital asset end on a low note. Bitcoin and other cryptocurrencies are already being rocked by social and political issues, most recently, the invasion of Ukraine by Russia. These have seen the digital asset plummet towards $35,000, giving bears a complete hold of the market.
BTC recovers above $35K | Source: BTCUSD on TradingView.com
For the first half of February, bitcoin had recorded 17% growth. But from mid-month to the end of the month, it has turned down, with over 12% losses already being recorded. If this pattern continues, then bitcoin is looking at another week of losses before ushering in the month of March. This would mean that the digital asset could see significant growth from the beginning of March till mid-month.
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It is still unclear what is leading to this cyclicality. However, the CME future expiry has presented one of the strongest arguments for it. Arcane Research notes that the digital asset is known to revert to its monthly VWAP price which coincides with the max pain price of month options. Although it is still unclear if this is the reason behind this cyclicality.
Featured image from USA Today, charts from Arcane Research and TradingView.com