How to deal with crypto seasonality?

What is Crypto Seasonality?

Crypto seasonality refers to the belief that sentiment towards Bitcoin will rise or fall over a period of time, greatly affecting the entire crypto market.

Bitcoin (BTC) is the world’s largest cryptocurrency and the first one ever created. As the first cryptocurrency, it has always held a large amount of value, and all subsequent tokens, also known as altcoins, are tied to it in some way.

However, Bitcoin is not a stable asset. The value of the world's first cryptocurrency is constantly changing, falling or rising by tens of thousands of dollars at any given point. This volatility is expected to peak every four years and then crash relatively violently due to the Bitcoin halving. The Bitcoin halving is programmed into the Bitcoin blockchain. Every four years, the halving also halves the mining reward, which effectively ensures that with each block mined, there are fewer Bitcoins in circulation.

The market tends to correct after the halving, with the price of Bitcoin rising due to its scarcity but crashing soon after as investors cash out their newly earned profits, which causes the market to overcorrect. While Bitcoin crashes, more investors start to worry about their investments and may exit and move their funds into altcoins.

Is Crypto Seasonality Good or Bad?

Crypto seasonality affects everyone, but whether it is good or bad depends on your perspective and investing personality. New traders may view seasonality as a good thing because they can invest in Bitcoin now at a lower price. However, long-term holders may despise crypto seasonality because the Bitcoin they hold crashes almost every four years, forcing them to wait out the lows or reinvest their holdings in altcoins.

That said, one can almost always expect Bitcoin to rally back up due to supply and demand. While this belief is never guaranteed, the leading cryptocurrency has so far risen to all-time highs after each halving.

How Does Crypto Seasonality Affect Investors?

Cryptocurrency seasonality may force investors who only hold Bitcoin to gamble in the altcoin market.

When the price of Bitcoin plummets, investors are almost forced to enter the altcoin market to continue generating profits. That said, altcoins are completely unpredictable, and a project that is extremely popular one day may suddenly collapse the next day.

The altcoin market is also full of scams. Attractive and deceptive marketing leads to investors being taken advantage of. Regulatory policies are still being developed and may negatively impact the trader experience. Exchanges can be hacked and assets can be stolen. In the wild west that is the altcoin market, there is really no telling what will happen.

Of course, there are safer approaches. Investors can buy into established passive income methods like Uniswap (UNI) liquidity pools, or participate in the mining or staking process of a coin rather than simply investing in it, but these processes still carry inherent risks.

Weathering the crypto storm

A crypto seasonality solution exists in the form of continued accumulation of assets.

While there may be multiple solutions to crypto seasonality, one crypto startup, Seasonal Tokens, is developing a potentially safer alternative to traditional trading methods. Seasonal tokens are designed to rise and fall over a 9-month period, hoping to provide investors with a more stable alternative to Bitcoin’s downward trend.

The project divides its tokens into four seasons: SPRING, SUMMER, AUTUMN, and WINTER. Ideally, investors would buy Spring tokens when they are cheapest and hold them during the period when they become most expensive.

As the seasons change, investors would convert these Spring tokens into Summer tokens, which could see their price increase the next time, and so on. In a perfect scenario, when Spring tokens are most expensive to produce and Summer tokens are cheapest, investors would swap Spring for Summer, increasing the total number of tokens they own. Then when Summer tokens peak, investors would swap them for Fall tokens at their lowest point, accumulating more.

These peaks and valleys are based on periodic production cuts, similar to Bitcoin halvings. For example, in June, the production of Spring tokens will be halved, making them more expensive to produce than other tokens. When spring arrives again, users will convert their Winter tokens to Spring tokens and profit from their scarcity, all without investing additional real-world funds.

Based on this model, Seasonal Tokens hopes to provide an asset that continues to accumulate and appreciate in value, providing a safe space for investors to transfer funds during the Bitcoin bear market.