In late September, after a broad-based market rally that included major global stock indices, Bitcoin once again surpassed $66,000 before falling back. Some analysts are predicting that the leading cryptocurrency could hit $100,000 by the end of the year, a forecast that has also been influenced by expectations that Bitcoin will reverse previous market cycles after the halving, as well as the potential impact of the outcome of the US presidential election. Added to this is the fact that the fourth quarter is historically the time when Bitcoin typically records its best performance.

So this article will delve into this potential year-end bias, in an attempt to understand what to expect from the Bitcoin price, and whether there is truly a market edge that can be exploited through systematic trading.

Historical analysis of Bitcoin's average annual movements

First, we can see how Q4 is historically the quarter with the best average return ratios (source Coinglass.com), which is around 81% (with a median of 31%), compared to an average of 56% in Q1, 27% in Q2, and just 6% in Q3.

This seems to confirm the bullish year-end trend for Bitcoin. When analyzing the relative returns in individual months, it becomes clear that October and November were often positive months for Bitcoin, with October in particular showing both the mean and median around 21% and as many as 9 positive cases out of 11 (2013-2023): data that earned the nickname UPtober.

To delve deeper into this potential end-of-year edge, Bias Finder will be used, a tool developed specifically for Unger Academy students, which is able to analyze recurring behaviors in markets through the average price trend.

Using the spot cryptocurrency pair BTCUSDT as a tool, with data starting from January 2018 and a 15-minute time frame, it is possible to evaluate different time horizons: daily (intra-day), weekly (weekly), monthly (monthly), or yearly (yearly). In this case, the annual period will be evaluated, which provides a chart showing the trend of the BTCUSDT pair, expressed as the average cash flow during the year (Figure 3).

From the chart provided by Bias Finder, it can be seen that October is on average a very positive month, while November does not look as strong in results: the reason is certainly related to the fact that the data available for BTCUSDT starts from 2018, and as also shown from the table in Figure 2, from 2018 to today, November has closed more negative than positive.

If you want to delve deeper into the analysis, the Bias Finder tool allows you to overlay the average trends for the individual years available on the chart (Figures 4 and 5).

It is clear that in 2020, 2021 and 2023, there was already an upward trend in the last quarter of the year, while in 2018, 2019 and 2022, the performance was flat or slightly negative: this does not support the existence of a real market advantage that can be effectively exploited in systematic trading.

It is still possible to consider a strategy of buying in early October and selling by December, or a system that only trades long-term during these three months. However, the statistical significance will still be low, given the limited historical data available, so it is better not to proceed.

Bitcoin Halving Impact: Is There a Sharp Rally Coming?

Assuming there are no conditions to develop a trading strategy, it is still possible to estimate the likely direction of Bitcoin prices from now until the end of 2024, based on its historical trend in post-halving periods, remembering that it is not automatic that the same scenario we have seen in the past will occur in 2024.

It is well known, in fact, that the regularity with which the halving process has been completed in the past has been the beginning of significant upward movements for Bitcoin. However, unlike in the past, the halving process at the end of April 2024 stands out from previous events due to a series of unique factors, the consequences of which have not yet been evaluated.

Global macroeconomic conditions, such as inflation in major economies and monetary policies of central banks, also affect the cryptocurrency market. A potential economic crisis or turmoil in traditional financial markets linked to the geopolitical situation could increase demand for Bitcoin as a safe haven asset, positively impacting its price.

As mentioned, there is an expectation to see behavior similar to what happened in the months following the halving: a period of sideways movement for about 160-170 days, then breaking the previous all-time high and triggering a significant “bullish rally.” Analyzing the situation at the date of writing this article, which is October 9, 2024, we note that 170 days have already passed since the last halving (blue rectangle in Figure 6) and Bitcoin has not yet broken the previous all-time high of about $73,000.

We can then find estimates like the one shown in Figure 7 (source: Bitbo.io), where the price cycle seen over the past four years (roughly the halving period) is taken and repeated over the next four years, assuming that the cycle actually repeats. Obviously, this is just an estimation exercise, and its statistical significance is relative, so it should be taken at face value, remembering that only the market can determine the true direction of Bitcoin.

Final Considerations and Impact of Macroeconomic and Political Events on Bitcoin Price

In conclusion, it has been noted that the theoretical upward trend of Bitcoin in the last three months of the year does not have a strong enough statistical basis to be exploited in systematic trading.

However, expectations for a new record high by the end of the year are high, driven by the regularity with which halvings in the past have been the start of major bullish moves, but also by the unstable global macroeconomic conditions and geopolitical situation, which could increase demand for Bitcoin as a safe haven asset. The outcome of the US presidential election could also generate volatility and act as a catalyst for the start of a new bullish cycle.

The trading weeks of the current year are few, and all that remains is to watch what will happen at the end of 2024, to confirm or deny these assessments.

See you next time and happy trading!

#BTC

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