Crypto forecast: Best time of year for Bitcoin prices is now

Cryptocurrency investors have had a rocky 2022. But we’re now entering a time of year that’s usually good for crypto prices.

Bitcoin, ether and other cryptos have moved in patterns similar to stocks this year. They have fallen amid high inflation and the Federal Reserve’s rate hikes — a move meant to cool the economy but also tends to lower the price of financial assets such as stocks, bonds and crypto.

Bitcoin, which peaked at around $68,000 per coin last November, has plunged to around $20,000. Ether, the second largest cryptocurrency by market capitalization after bitcoin, rose to a peak of around $4,800 per coin last year and is now close to $1,350.

Nevertheless, there may be reason for optimism. While past performance is no indicator of future performance, data shows that crypto prices tend to take a hit during the final months of the year. In fact, we have just entered what is generally considered the best month for bitcoin prices.

Here’s how crypto has performed in October, November and December of previous years and what investors can expect in 2022.

Crypto prices usually rise at the end of the year

September is usually a bad month for bitcoin, but it ended the month down just 0.5% through midday Friday, analysts Bespoke Investment Group wrote in a note to clients late last week. That’s much better than the S&P 500, which lost 9.3% in September. However, Ether underperformed with a 12.5% ​​drop.

“This weakness during the month was in line with seasonal patterns, but weakness has the potential to turn to strength as October begins,” the Bespoke analysts wrote.

If recent historical trends hold, crypto prices may now look up. Over the past five years, bitcoin has gained an average of about 25% in October — its biggest gain for any month — plus 8% in November and 11% in December, according to data from Bespoke. October has been a positive month for bitcoin’s price 80% of the time, while November and December have been positive months only 40% of the time.

Ether’s past results are a bit more mixed towards the end of the year, according to Bespoke’s analysis. Looking at all years since 2018, the price of Ether has seen an average increase of 9% in October, but only around 2% in November and less than 1% in December. And while October has been a positive month for ether 75% of the time since 2018, November and December were positive months only half of the time.

Why crypto has outperformed in recent months

It is difficult enough to explain why stocks rise and fall. Understanding crypto price movements is much more difficult for a number of reasons. For example, stocks have fundamentals like company earnings that analysts can assess while cryptos do not. Shares are also less volatile.

Still, experts can attempt to provide explanations for crypto’s seasonal trends. For professional investors, there is always a lot of money moving during the fourth quarter. Investment and risk committees are completing research and due diligence projects, and investors are thinking about how they want their portfolios positioned at the turn of the year, said Matthew Hougan, chief investment officer at Bitwise Asset Management, a crypto index fund manager.

“On the margins, in most years, this drives crypto allocations,” he adds. – I suspect it will be this year as well.

In addition, stocks and crypto are seeing related price movements, says Mark Connors, head of research at Canadian digital asset firm 3iQ. While the seasonal pattern of bitcoin – the largest cryptocurrency – may not be as strong as the seasonal pattern of stocks, stocks and cryptocurrencies have moved similarly this year.

Experts attribute much of this to the wider use of crypto.

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Where to expect crypto prices are moving forward

Seasonal variations and historical data do not guarantee how prices will perform in the future. However, the numbers may give us some insight into what to expect for the rest of the year from crypto prices.

“There’s a lot of optimism here that bitcoin is stabilizing here, and — given this current macro backdrop — that’s pretty impressive,” said Edward Moya, senior market analyst at multi-asset broker OANDA. Bitcoin’s price managed to stay relatively stable last week as other assets plunged.

Moya adds that some investors seem to believe that crypto is near or has already reached a bottom. All of this supports the potential for a positive year-end for crypto.

“Are there potential catalysts that could turn bitcoin below the summer lows and into freefall? Simple,” says Moya. “But right now, that’s not how people are positioning themselves.”

Overall, the likely trajectory of crypto prices remains quite unclear. At the moment, there is perhaps more uncertainty surrounding crypto than usual, thanks to the ongoing series of interest rate hikes.

“Seasonality exists, but the Fed’s hike cycle has thrown a lot of that out the window,” says Connors.

In short, the last quarter of the year tends to be generally good for crypto. But using past performance to try to time the market is not a strategy that financial advisors recommend. Especially when it comes to an asset as volatile and unpredictable as crypto.