Atypically Bearish Early December Bodes Poorly for Bitcoin Investors

Bitcoin (BTC) investors should remain cautious.

Historic pricing data for BTC suggests crypto winter will likely worsen next month. So far this month, bitcoin investors have suffered an average 0.08% daily loss, which is far lower than the 0.20% historic average for the month.

Spread over 30 trading days, investors would lose 2.4% compared to the 6% gains they notched for bitcoin in past Decembers.

Since 2014, bitcoin’s average daily returns have historically been the lowest in January. What’s made these dips less troublesome in past years is that December and February have traditionally been strong months for the largest cryptocurrency by market capitalization.

Bitcoin has been hovering above $17,000 for the past two weeks, except for a two-day dip last week as investors mulled over the latest fallout from crypto exchange FTX’s collapse, and concerns about inflation.

The price invariability and declining trading volume have highlighted investors’ fretfulness. They have been unwilling to forge more strongly into the market until they see firmer signs of macroeconomic improvement. Caution and risk aversion are the flavor du jour and bitcoin’s status as a hedge asset seems antiquated.

By contrast, ether has generally performed well in January. Daily returns for the asset have averaged 0.49%, dating to 2017.

This difference between ether and bitcoin is counterintuitive, given their normal tightly correlated pricing relationship.

Moving from monthly to quarterly data offers a more mixed picture. Since 2014, January’s drag on BTC prices has led to a negative performance during the year’s first three months. However, from 2019 BTC’s performance has been positive in three of the four first quarters during this timeframe. Ether has generated positive average daily returns for every first quarter.

Regardless, a weak December ahead of a traditionally weak January doesn’t offer great hopes for bullish bitcoin or ether investors. Whether February offers improvement remains unclear.