Bitcoin is following seasonality like agricultural commodities, except that the governing factors are different in the case of the cryptocurrency. Agricommodities generally have factors like El-Nino and harvest periods which have significant impact on the market prices. While in the case of Bitcoin we are not sure about the driving factors for seasonality, the pattern has been recurring and indicates that a storm is about to come.
The calm before the storm:
Gold has been prevalent from ages and has earned its place as store of value over time. If we look at the journey of Comex Gold, the trading started in 1975 with Gold price lingering around $175 with a few 50,000 volumes per day. It has built up prices organically from 1975 and reached an all-time high of $1900 later plummeting due to the oil crash. The volumes increased consistently from 50,000 in 1975 to 3-4 Million in 2017 making it one of the very liquid and compact metals market. Apart from its value owing to its application, one of the major positives of Gold is its non-correlation with other assets.
Bitcoin Markets Data Provider: Brave New Coin
The possible Seasonality:
In most of the agricultural commodities, seasonality is a very important fundamental factor that has driving effects on the market. Since agricultural commodities depend heavily on rains and other climatic factors, it is understandable to see price fluctuations in line with the changes in these factors. Other seasonal factors that would influence the prices of commodities include crop cycles, harvest period and post-harvest analysis and storage. Seasonal changes and its impacts like El-Nino are well known in the crop commodities sector and their changes are tracked religiously by market participants to understand the perceived value of these commodities.
While exploring the Strategic Bitcoin price prediction model, we have used Time series regression analysis and were mapping the seasonality of the cryptocurrency. One interesting observation is that just like agri-commodities, Bitcoin prices have been following seasonality in terms of their half yearly patterns. We traced the developments back to the start of 2015, where the price of Bitcoin started gaining momentum. While the first half was fairly straightforward increase in prices, the yearend saw good leap in prices that wasn’t expected or in line with the forecasts.
The pattern repeated in the first half of 2016 with Bitcoin cruising high due to Chinese Yuan devaluation and Brexit influence. Towards the end of the second half of 2016, Bitcoin price almost touched the all-time high. While there were Geo Political factors that are driving the cryptocurrency in most of the cases, the pattern uncannily is seasonal and suggests the possibility of mainstream activity with Bitcoin that might have propelled prices. Possible speculation is that there are institutional investors who are entering and exiting Bitcoin markets around the same time every year and causing the increase in prices. Nevertheless by the seasonal pattern, Bitcoin is expected to go up by mid-April and taking a long call now on the market would be profitable.