Visualizing Bitcoin Returns: It’s not that complicated to invest in BTC
Bitcoin price is down in the dumps as it continues to consolidate in a tight range. Choppy markets are irritating, especially for short-term investors.
Here are a few pointers on how to alleviate your frustration and improve how you view investments.
Before we proceed any further, here are some things you need to familiarize yourself with
- This is NOT financial advice.
- The data available for Bitcoin price history is too little for the conclusions in this article to continue working.
- DYOR.
Bitcoin price performance and cycles
This article builds on top of the work that has already been on done Bitcoin cycles by Benjamin Cowen of Intothecryptoverse and Akash Girimath.
Based on Bitcoin cycles, this article hypothesizes that the fourth BTC cycle will last roughly 1760 days from the previous cycle’s bottom in December 2018. It also approximates that the peak of this cycle will be formed in late August 2022 at $118,000 per Bitcoin.
Assuming this is true would implicate that the current slowdown or drop is but a minor hiccup and that the bull run will continue for 413 days, which will push BTC price up by 244%.
The takeaway from the above is that Bitcoin, like any other asset, is a fractal and things tend to repeat. For example, BTC runs in cycles, a bull run, and a bear run, but what’s interesting is that the cycles are lengthening.
The fractal nature becomes apparent when moving down to a lower time frame and is observed in BTC performance.
Quarterly and Monthly returns
From the above table, one can conclude that Q1 is generally the worst-performing quarter for BTC, and Q2 and Q4 show relatively higher returns. This trend held true from 2014 to 2020.
In effect, investors could dollar-cost average (DCA) into BTC in Q1 and sell in Q2 or Q4.
However, things seem to be changing in 2021. For the first time since 2014, the BTC quarterly return exceeded 9% in Q1 and hit a new high of 102.93%. Likewise, Q2, which typically provided good returns showed the worst performance over the past 7 years.
One common denominator is that Q3 has so-so performance.
So, how do you approach this from an investment perspective?
Based on the data the quarters that have negative returns or near-zero returns are the best time to invest in BTC. Quarters that have higher returns are where market participants should be booking profits to maximize their returns.
Fine-tuning using Bitcoin cycles and monthly returns
Since cycle 4 has roughly more than a year to hit a new all-time high, investors can DCA BTC in quarters with negative returns and sell at or near the peak. Although it was not apparent from quarterly returns, the recent drop was a good time to buy the dip.
Going forward, Q3, which has an average return of 3.26% seems like a good quarter to invest in BTC. Adding credence to this fact is the monthly returns of July, August, and September (Q3) is less than 8%.
The highest average monthly return over the past decade is seen in November, which currently hovers around 55%. Short-term investors should consider booking profits here, long-term investors can realize a portion of their profits and reinvest in the following months using the logic mentioned above.
To conclude
The long-term game plan rests on the assumption that Bitcoin price will hit $118,000, which will provide investors an opportunity to accumulate BTC in red quarters/months and sell in green.
The short-term game plan is BTC retesting $40,000 or the range high at $41,322 and is explained in detail in this Twitter thread.
