Since falling earlier this week, the bitcoin price has been struggling to get back up. BTC/USD continues to trade under $9,200 in red on low volume.
But this shouldn’t be of much concern if history is any guide.
If we take a look at the quarterly returns, the quarter 3rd of 2016, the year bitcoin had its second halving, the returns were negative 9.21%. The last bitcoin reward halving took place in July 2016.
The month after the halving in 2016, bitcoin recorded negative returns which were because of the Bitfinex exchange hack and Ethereum DAO attack.
As such, analyst Rekt Capital says, “Negative Quarterly Returns for BTC this coming Q3 wouldn’t be out of the ordinary for a post-Halving period.”
In a separate tweet a few days back, the analyst has noted that, based on the world’s leading digital currency’s historical quarterly performance, “Chances are Bitcoin could see some downside in Quarter 3,” as well.
In the past six years, in four years the upcoming quarter recorded negative returns with the exception of the 2017 bull run and 2018 bear market.
Quarter 1 has been pretty much the same, heavily skewed towards losses historically and we end up falling in 2020 as well. Meanwhile, the green Q2 over the years resulted in gains for 2020 as well. Although past performance doesn’t guarantee future results, it is something to keep in mind.
Analyst PlanB also shared that monthly returns during the last halving have been “very asymmetrical.” But if Bitcoin has its typical month with substantial gains, we can easily climb to $12,000.
— PlanB 🔴 (@100trillionUSD) June 26, 2020
In contrast, if we look at the downside, the analyst points out there have been only two times that a negative 30% move happened in the last four years but a 30% spike happened 10 times which means the corrections might not be deep.
While many are hoping for bitcoin’s drop to $7,000, a drop of 25% isn’t that typical which we saw in March this year during the coronavirus pandemic wide market sell-off. Before that, we saw it thrice in 2018.
According to PlanB, $7,000 “seems highly unlikely” with all the money printing the governments are doing. “COVID just triggers more QE, which is net positive for both stock markets and BTC,” he said.
However, bitcoin remains correlated with the S&P 500 and a lot of bad news is converging on Wall Street. While the market sentiments have started to turn bullish, COVID-19 and political risks are rising. Moreover, the period of July to October is a seasonally weak time of year.
Bitcoin has been following the SPX pretty closely lately, just weaker.
I hope that relationship ends soon, one of the main reasons why crypto as a whole is so attractive is that it’s not correlated.
— DonAlt (@CryptoDonAlt) June 26, 2020
The International Monetary Fund has also warned that investors are “betting on continued and unprecedented support by central banks” and the disconnect between the market and economy is raising the risk of another slump in prices.