Financial data that demonstrates seasonal tendencies, such as the Gross Domestic Product (GDP), can be used to compare recession and growth seasons in traditional markets. Furthermore, it is thought that the price of a specific product might adapt to climatic variation, resulting in winter and summer trends. Some financial data, such as calendar events for a company’s stock price, demonstrates how prices adapt to market seasons.
There have been seasonal trends in the crypto market statistics since its inception, particularly in bitcoin, which is the first and largest of all crypto assets in the market. Some of these patterns are based on several ideas, such as the impact of the tax season, public holidays like Christmas and Chinese New Year, and greater blockchain/trading activity over the winter months.
What is Crypto Seasonality?
There is a widespread belief that cryptocurrency, particularly Bitcoin, will increase and fall over time, which has had a significant impact on the overall performance of the crypto market. Crypto seasonality is the term for this view.
For the time being, Bitcoin remains the largest cryptocurrency in the world and the first to be formed, which has allowed it to store tremendous value in it at all times. However, every coin that comes after bitcoin, known as altcoins, has its value linked to bitcoin in some way.
Bitcoin is not a stable asset for what it is worth. This means that the value of the world’s first cryptocurrency fluctuates. It can fluctuate by tens of thousands of dollars at any time, with no obvious signal to foresee the movements. Furthermore, due to the Bitcoin halving, it is projected that the asset’s volatility would peak every four years before plummeting dramatically.
Due to the scarcity phenomena generated by the halving occurrence, it has been shown that the market tends to correct itself, which can lead to a large increase in the value of the asset. The market, however, falls after a short amount of time as investors withdraw their assets to book their newly-earned profits. This will cause the market to overcorrect, causing panic among other investors, who will often withdraw their cash in order to invest in altcoins.
Is it Good or Bad?
The underlying reality about this phenomenon is that it impacts everyone, but whether it is beneficial or harmful depends on the trader’s investment personality. Also, the influence is more dependent on the investor’s perspective when it comes to crypto seasonality.
Crypto seasonality can be beneficial to beginning traders because they enter the Bitcoin market at a lower price. For them, the asset’s quick increase in value may appear to be the ideal time to take profits from the market. Other investors with a long-term outlook on the market, on the other hand, may be concerned. They dislike the crypto seasonality issue because they predict the value of their Bitcoin assets to plummet every four years. This forces them to either wait out the lows or withdraw their assets to reinvest in the altcoin market.
Regardless, you can always expect BTC to grow until demand and supply have reached an equilibrium. Although there is no certainty that this notion will be realised, the main crypto asset has a history of achieving higher highs after each halving event.
Crypto seasonality has a variety of consequences, one of which is that investors who only invest in bitcoin risk their money on other altcoin markets. When the price of Bitcoin falls, investors are forced to withdraw their funds from the BTC market and invest in alternative cryptocurrencies.
This is to ensure that the crypto market continues to generate profits. However, the cryptocurrency markets may be highly unpredictable since a project may perform well one day and then fall the next.
Furthermore, there are numerous scams in the altcoin marketplaces, which can be hazardous to investors. Project owners can utilise false marketing and rug pulls to take advantage of investors. There are also regulatory policies in place, which might negatively impact traders’ experiences as they unfold. Furthermore, exchanges can be hacked, and any investor’s holdings can be taken. In general, no one can predict what will happen in the wild west of altcoin markets. There are, of course, other options for investors to profit from the altcoin markets, which are believed to be safer than direct investments. Some of the most reliable crypto platforms are:
The problem of crypto seasonality can be solved in a variety of ways. One of them is the continuing increase of cryptocurrency assets.
In an ideal world, an investor would trade-specific tokens for another token when they are at the highest price, and the replacement tokens are the lowest on the market. This will also raise their total quantity of tokens. Also, once the token has reached its maximum value, the investor will swap it for new ones, which will be at their lowest value at that time. This will also result in the collection of extra tokens.
These market ups and downs are thought to be the source of the production cuts that occur at regular intervals. This is analogous to the halving of bitcoin. In June, for example, the tokens’ production will be halved, and their manufacture will be more expensive than any other token on the market. Users will be asked to exchange their specific cryptocurrencies for another set of tokens when the seasonal surge resumes. This will allow people to reap the benefits of scarcity without having to contribute additional real-world dollars.
Every trader should be aware that the cryptocurrency market can be volatile at times. This is due to the fact that it is still a new technology. On the other hand, those who trade CFDs may not be affected by the crypto seasonality phenomena because they can profit from the market without having to wait for the assets’ value to rise. If you are a spot trader, you may need to consider the options stated above.