Photographer: Michael Nagle/Bloomberg
© 2021 Bloomberg Finance LP
Cycles exist in all markets. The researcher simply needs enough data to compute meaningful cycles. The first attempts at computing cryptocurrency cycles were not successful because insufficient data produced unstable cycles. Over the past few months, the cycles have become more consistent.
The first graph is a monthly histogram depicting the price behavior of the Grayscale Bitcoin Trust (GBTC). We can see that the month of May has been the strongest in this short six-year history. Bitcoin has risen in four of the five years for an average 63.1% gain or an expected return of 50.5%. This strong month has been followed by four months of seasonal weakness.
Bitcoin Trust Monthly Histogram
Bitcoin has been strongest in May.
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Blue: Average Percentage Change
Red: Probability of a rise on that day
Green: Expected Return (Product of the first 2)
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Here is the daily histogram for the days of the week. We can see that the early part of any week has been the strongest.
Bitcoin Daily Histogram
Monday has been the strongest day.
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The prior cycles are static in the sense that they change slowly. The more recent cycles are dynamic in that they change based upon the most recent price trends. These cycles will be a more reliable guide. Below is the monthly cycle. This rhythm has been correct in four of five cases on buy signals over the last year. All four sell signals have been profitable. Note that a buy signal is occurring in this week.
Bitcoin Monthly Cycle
The cycle is bottoming.
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The weekly cycle is on a sell signal but has a much lower percentage of success. The daily cycle matches the monthly cycle in that it is also in a buy mode.
Experience demonstrates the probability of success is maximized when the monthly seasonal histogram and the dynamic monthly cycle are synchronized. This combination points to higher bitcoin prices.
The next chart shows the daily price, momentum in blue, and relative strength (versus the US dollar) in green. Price has been in a consolidation range since February. Price is currently oversold. A breakout above $55 which appears imminent projects price in the $65 area or higher.
There are technical buy signals.
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