Research: When is the best time of year to buy BTC to make money?

There are two important decisive factors in investment: one is the target selection, and the other is the timing. If you have decided to invest in BTC, choosing when to enter and when to exit is something that investors need to consider carefully.

For example, choosing the entry time is very important. No matter how good a currency is, if the purchase price is too high and you buy it at the top of the mountain, it will be difficult for you to make money on this currency, and you may even lose money. We are deeply impressed by the recent surges of BTC, such as September and October 2017, June and July 2019, and the recent plunges of BTC, such as February 2018 and March 2020. But is there any pattern to follow in the entry and exit times corresponding to the surges and plunges of BTC?

This issue of Feixiaohao Research analyzes BTC market data from 2018 to date to find out whether BTC also has a "January effect" similar to the stock market.

1. Is there any pattern in the monthly yields throughout the year?

By analyzing the monthly ups and downs of BTC in 2018 and 2019, we found that there seems to be a wave of market in the second quarter of each year, which is consistent with the concept of capital circle we have known before (it is rumored that all capital projects are launched in February). For ordinary spot investors, they should seize the spot market in the second quarter, as the main time to make money in the year is in the second quarter.

2. Is there any rule similar to the “January effect” in the stock market?

The January effect in the stock market refers to the fact that in January each year, due to the withdrawal of funds from the market, there is insufficient trading volume, so the price is at the lowest point of the year. Buy at the lowest point of the year and sell after the price rises. In fact, a similar effect of China's A-shares is the "February effect", which is related to the date of the Chinese New Year.

The cryptocurrency world can also refer to similar effects, such as buying during the Spring Festival or at the end of the year, holding until the market starts after the New Year, and then looking for a high point to sell. However, it should be noted that it is not blindly buying in the entry month, but it is necessary to use technical means to find a low point to buy. For novices, the method of average cost opening a position at the low point in the first quarter can be adopted.

3. Which month of the year is most likely to be the lowest point?

At present, the "January effect" in the cryptocurrency market is not like that in the A-share market. It is clearly a "February effect."

However, we know that the position must be established before the second quarter. As for whether the continuous position building cycle will be 1 month, 3 months or 6 months, we do not know. We believe that the actual situation of each trader will also affect how long in advance the position is established.

The trend is gradually starting to rise from the lowest point of each month. Perhaps February is a good time to open a position, but if there is still a possibility of a decline in March, then you must hold it until at least April. It is generally not recommended to hold it until the third quarter because after the third quarter, the probability of a market decline will increase.

From this perspective, the fluctuations in the cryptocurrency market have a certain seasonality, which is a combination of seasonality, trend lines and random white noise.

4. Can seasonal patterns be verified through “quantity”?

Yes, the trading volume is highly synchronized with the price, and the trading volume also shows seasonality, and the relationship between volume and price will become more and more significant as time goes by. This also tells us that if the price is very low and the trading volume is significantly lower than the average level of multi-month trading volume, then now may be the time to open a long-term trading position.

5. Will the seasonality of the cryptocurrency market become stronger?

The answer is yes. When Bitcoin was first created, the rapid rise in its price was the mainstream of the entire circle. However, as the price of the currency rises to a certain stage and Bitcoin is increasingly accepted by the public, the trading volume will expand, and the trend slope of the currency price will gradually weaken, while seasonality and white noise will gradually increase.

Simply put, the fluctuations in the cryptocurrency market dominated by BTC prices will become smaller and smaller, and seasonal capital inflows and outflows will become more influential. This is also a transformation of the market from a niche to a gradually mature one.

6. Basic use of the law of quantity and price

Volume and price follow the rule of rising and falling together. Once the trading volume increases, the price will most likely rise; if the trading volume decreases, the price will most likely fall at the same time.

The divergence between volume and price indicates a reversal of the market. Once the price rises but the trading volume falls, there is a high probability that the market will run out of steam in a short period of time and then fall; once the price falls but the trading volume rises, there is a high probability that the market will stop falling and rebound in a short period of time.

After analyzing the spot market patterns of BTC, we will start with futures to see if there are the same market ups and downs.

7.Does futures also have seasonal patterns in quantity and price?

Although futures data is shorter than spot data at present, the rules of futures are more obvious, which is related to the gradual increase in futures trading volume and active trading.

However, it is worth noting that futures products are more suitable for short-term operations due to their leverage advantages. Therefore, if you use the "February Effect" to enter the market and hold for a long time, you will encounter problems such as the contracts you hold facing delivery, the inability to withstand large price fluctuations after opening a position, and the cost of holding perpetual contracts. Therefore, it is recommended to use short-term volume-price relationships in futures, rather than long-term holding strategies such as the "February Effect".

8. Judging from the current market conditions, have we missed the opportunity to build a long-term position this year?

The current market has reached several highs above 10,000 points since March 12, so the current prices are relatively high and it is not appropriate to establish seasonal positions.

From the above analysis, we conclude that it is more appropriate to build a position in the first quarter. After the price reaches a high point in the second quarter, you should gradually reduce your position and exit the market to make a profit. If you are a long-term holder, it is not advisable to reduce your position at this time, but you should consider exiting the market after making a profit.