Market Entry Strategy for Cryptocurrency

There was a peculiar phenomenon that happened post the January dip, a large number of people on fb, twitter, reddit started to claim that this dip was something that they expected all along and apparently, this has been happening every January. Posts were shared, articles were written, then the order was interchanged, articles were shared and posts were written. And all the while common people like you and I sat around worrying, was the world ending?

Why was it that our fellow netizens fail to notify us before this was coming?

I don’t know the reason, but I will try to not let it happen again. I will be dividing the timeline into timeframes of 6 months, and try to recognize similar patterns. As they say, “Fool me once, shame on you; fool me twice, shame on me!”

bitcoin trends
BTC Trends: January 1, 2014 to June 30, 2014
bitcoin trends
BTC Trends: January 1, 2015 to June 30, 2015
bitcoin trends
BTC Trends: January 1, 2016 to June 30, 2016
bitcoin trends
BTC Trends: January 1, 2017 to June 30, 2017

If we go through the above charts we can clearly see that 2017 and 2016 charts are similar. The charts prior to that, i.e., 2015 and 2014 are not as similar. 2015 and 2016 though, bear some resemblance to each other, such as the January dip, the uptick in prices at the end of the period.

The 2015 chart shows a significant uptick in February, whereas in 2016 and 2017, the market remained flat for the time between February and late May. Now a lot of you may ask why is it that I am not considering the 2014 market at all, and it’s simply because I feel the level of maturity that we have in the markets right now was simply not there in 2014. The same stands true to some extent for 2015.

Inference:

  1. The month of January experiences a dip, that we would do well to avoid next time
  2. We find that in the latest 2 graphs, which should be given the most weightage, there was a long period when the market just floated around in doldrums, namely the period between February and late May.
  3. There was an uptick in the market during late May/early June, and that is when a strong bull run started amplifying returns

Now we go to the second half of the year:

bitcoin trends
BTC Trends: July 1, 2014 to December 31, 2014
bitcoin trends
BTC Trends: July 1, 2015 to December 31, 2015
bitcoin trends
BTC Trends: July 1, 2016 to December 31, 2016
bitcoin trends
BTC Trends: July 1, 2017 to December 31, 2017

In all of the above graphs the bulls come in control at around the end of October or the beginning of November. The second part of the year has consistently given stellar returns. July to October has mostly been unremarkable.

Interestingly, in each graph barring 2017 (the immediate preceeding year) there has been a strong decline in values in August, so according to me, that should again be a cautious time for all of us.

Inference:

  1. No or very scant movement from July to October. The market stays flat and rangebound. I’d be willing to bet anyone who enters crypto in late September and HODL religiously would outperform all the other guys that will hold throughout. This is because the other HODLers are bound to get scared out of their positions at one point of time or another, since, eventually FUD affects everyone.
  2. Strong bull run around late October. Thus this is the time when you should be entering the market.
  3. There has been a sharp decline in August in all charts except the last one (i.e. 2017). Since we allot highest weightage to the last chart we must swallow this pill with a bit of doubt, however, better to be safe than sorry. So first sign of trouble in August and it’s time to bail.

However, things change:

We must remember that this analysis is primarily being done to give you a rough idea about how the market behaves in different times of the year. As you can see, I’ve listed a number of pointers, but it is prudent for an investor to understand that it is not necessary for history to repeat. And again, there are new factors that are there. Below is a small list of things that we need to consider before we can ride the trend.

  1. BTC futures: BTC futures are already listed in Chicago Board of Options Exchange, and Chicago Mercantile Exchange. They will expire every month on the 17th and last Friday of that month respectively (The dates are not exhaustive, there are other expiry dates for other series). Even NASDAQ has stated that it intends to list BTC futures in the 2nd-3rd quarter of this year. So we need to be wary of that.
  2. BTC Dominance: All the previous graphs were at a time when BTC dominance was significantly higher than it is today. With time, BTC may end up being replaced by other coins. (My bet is on Ethereum).
  3. There can be major FUDs, that will make us running for cover.

Verdict: It seems that following would be the best strategies to engage the markets:

For the HODLer

  1. Enter the market late May and HODL till August
  2. Enter the market late October and HODL the fort till December end

For the trader:

  1. Jan dips are a great time to enjoy the panic that creeps into everyone as the first great dip hits after the strong bull run till December. If cautious, one can beat the noob investors and make decent money
  2. The August dip, again a dip after the bull run, prices are reset and money is made

Leave a Reply

Your email address will not be published. Required fields are marked *