January Effect: Does Stock Market’s Popular Phenomenon Applies to Crypto Market
The beginning of 2019 saw a rise only to drop sharply soon after. Last month had the crypto enthusiasts hoping for a bull run and a new all-time high (ATH) for the Bitcoin.
Just last week, crypto prices fell sharply with Bitcoin losing about 10 percent of its value. Though it may have surprised many, it was no different than any other previous cycles.
The ongoing performance of the crypto market is no different than the previous years. One of the most discussed cycles is the 2014 and 2018. Both the years started with a surge in prices in their prior years. After seeing a jump in prices in January, it took almost three years to recover this high again in December 2017.
January 2015 saw the low of 2014’s crash. Though it is still to be known if the low is formed yet many are expecting bitcoin to hit bottom this year. It is a likely possibility that a similar scenario would be seen this time where the price would take a year to find its bottom and then go through a longer price reversal to reach its new peak.
Another such similarity could be analyzed via January effect which is a phenomenon seen in the stock market. The phenomenon that has its own share of critique was first observed in 1942, according to Wikipedia,
“The January effect is a hypothesis that there is a seasonal anomaly in the financial market where securities' prices increase in the month of January more than in any other month. This calendar effect would create an opportunity for investors to buy stocks for lower prices before January and sell them after their value increases.”
So, could it apply to crypto market? Let’s take a look at the prices in the January month across Bitcoins journey.
2012: 2011 ended with a price surge and started January in 2012 at $4.90. With about 47% increase, the prices fall about 48% at that month’s end.
2013: This year the month of January saw a surge for the most part.
2014: Bitcoin wrapped 2013 year by surging and started the new year at $730. Prices saw a 36% increase and maintained positive momentum.
2015: The year started with a long extending decrease since the high of 2014 January. Prices gradually decreased but remained just above $200.
2016: Price opened around $430 and traded sideways without managing to recover from the crash of 2014. The mid-January saw a decrease of over 21 percent from the high of the first week.
2017: Starting January on a positive note, prices took a drop over 30% in mid-January.
2018: After a good finish in 2017 as we all clearly remember, the prices saw an increase of 18% in the first week only to crash over 80 percent. And as we all know the price has yet to recover.
2019: The market started on a rise reaching $4k and then took a hit of 12%.
Nothing can be defined with accuracy if the January effect exists in the market or not. It’s not a sure matter that price would always crash after seeing a rise, however, we can take note of the similarities in play here and trade accordingly.