Known for its large price swings, bitcoin (BTC) has seen relatively quiet price action the over the last several weeks. The asset’s tides could change heading into 2020’s third financial quarter, however.
“Bitcoin has had a strong Q2 once again, +41% as of the 29th of June, and has recently been trading in a tight range between $9,000 and $10,000,” Emmanuel Goh, cofounder and CEO of cryptocurrency data analytics company Skew, told me on June 29 via email.
The third quarter “is usually more challenging from a performance perspective if you remove the exceptional 2017 vintage,” Goh added, pointing toward historical data aside from crypto’s massive 2017 bull run year.[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Bitcoin started 2020 off close to the $7,000 mark, according to TradingView.com price data. By mid-February, the asset found itself up near $10,500 per BTC before taking a massive tumble the following month. In the midst of Covid-19 prevention measures, fear and uncertainty, crypto’s largest asset fell below $4,000 by March 13 while the U.S. stock market saw similar downward price action during that same month.
Since March, however, bitcoin yielded a stupendous comeback, popping over $10,000 once again by early May, coming just shy of $10,500 by the start of June.
Although crypto’s pioneer asset showed strong recovery, May and June have largely seen bitcoin trading sideways, primarily between $8,500 and $10,000, accompanied by a number of sizable price swings, as well as several slow price days.
“Bitcoin had a record options expiry on the 26th of June with 115,000 bitcoin equivalent options expiring,” Goh said. Bitcoin options trading products come with expirations, giving traders a window in which to act before expiration, followed by the beginning of a new time period. On June 26, multiple bitcoin options trading products expired across the market, including products from the Chicago Mercantile Exchange CME and crypto exchange Deribit.
“In equity markets, it is not unusual to see markets trading in a tight range into large quarterly expiries and picking up a direction thereafter,” Goh said. “We will watch at the start of July if we are seeing the same pattern emerging in cryptocurrency markets.”
As a borderless digital asset asset built on blockchain technology and run by the people, theoretically away from governmental control, bitcoin’s price has not always travelled in line with mainstream markets, or in a similar fashion as those markets.
In December 2017, the CME brought cash-settled bitcoin futures trading into the mainstream financial world, allowing traditional investors and traders exposure to the coin’s price swings. The CME also launched bitcoin options trading in early 2020, after the Intercontinental Exchange (ICE) opened mainstream bitcoin trading products weeks and months prior.
Such traditional-type financial products might be in the process of leading bitcoin into similar tendencies as mainstream financial markets. In the past, the asset’s price has correlated with other markets at times, while blazing its own trail on separate occasions.
As 2020 heads into its third quarter, historical data shows mostly overall losses for the period each year since 2014, according to data provided by Goh. Out of all six periods, only two touted bitcoin exiting the quarter on a positive note. One of those years was 2017, mentioned as an exception by Goh, which hosted an 80.89% gain. The other — 2018, which showed a small gain of 2.92%. The other four years showed red third quarter numbers, including 2019, in which the asset exited the quarter down 21.50%.
Disclaimer: I actively trade cryptocurrencies, as well as hold a small amount of BTC, ETH, LTC, XMR, NEO, ZEC, BEAM, BCH, DASH, LINK, XTZ and various insignificant other altcoin positions.