Guest Author – Mil
Since the start of 2018, Bitcoin and the entire cryptomarket have been on a depressing bear market slump. For traders and investors who just recently discovered cryptocurrencies this year, the overall bearish sentiment of the market is just overwhelming. However, like the usual financial assets, Bitcoin and the cryptomarket operate in cycles. During the close of 2017, we just had a crazy bull run. It is just logical that a bear market come into play at this part of the cycle. As depressing as it is, here are two reasons why I personally believe that the bear market could be over soon.
Surviving the Bubble
A lot of people were saying that Bitcoin and cryptocurrencies were not a bubble. However, looking at this typical bubble chart, we can see that the cryptomarket became in a bubble towards the end of 2017. This chart perfectly explains what happened.
As 2017 closed, we saw Bitcoin take off in prices due to media attention, enthusiasm, public greed, and delusion. However, as the smart money started pulling out their investments and consolidating their gains, the dumb money from public FOMO also started pulling out at some losses. A bull trap happened during the first month of January, but fear, capitulation, and despair took over, which plummeted the prices to the $6000 low.
However, looking at the charts now, Bitcoin is currently returning to the mean level, which means that Bitcoin was able to survive the bubble. The only next logical move for Bitcoin is to move up and start a new cycle. The next move is the blow off phase. As the bearish sentiment becomes exhausted, more institutional money and smart money will come into play again, which could push the prices into bullish territory once again. Hopefully, the burst of the bubbly could provide investors and traders more insight into the price action of Bitcoin, which could potentially improve the stability of Bitcoin prices.
Seasonality of Bitcoin
Looking at the monthly returns of Bitcoin since 2014, we can see that the months of January and March are really months of struggle for Bitcoin prices. Although inconclusive due to lack of evidence, it seems that Bitcoin prices operate in a pattern. The market sentiment seems to favor certain months and seasons. For the month of January, a possible reason could be the pullout of Asian money due to preparations for Lunar New Year. As for March, most countries have their taxation season during this month, which means investors could be cashing out of cryptocurrencies to pay their taxes in time. If we look at this chart, we can see that the months of April to June were recovery months. A bit of bearish sentiment set in again during July to September, but major bullish movements come in towards the last quarter of every year.
If this proves to be true, we can see a decent market recovery in the coming weeks, and bullish sentiment could once again come into play.