Was this dip expected? 🤔
Looking seasonality and comparing the current market to last new cycles, we begin to identify certain patterns.
Time of Year 🗓
During the holiday season, investors can expect lower liquidity, less volume, and overall less activity in the markets as a whole.
Why? Investors and traders, like everyone else, have lives, plans, and traditions they like to spend at home with their loved ones. Typically fund managers and investors will close positions, similar to how schools, offices, and facilities close for 1-2 weeks from the middle of December to the new year.
Tax Loss Harvesting 🛡
This is a strategy used by investors to offset or reduce capital gains owed by selling profitable investments. This is done by selling an asset at a net loss, then using proceedings from a sale to purchase a similar asset and maintain the position.
For example: An investor purchases BTC and recognizes a $5000 gain, but sells ETH for a $3000 loss, which would make them being for taxes on $2000 gain instead of a $5000 gain.
It is common for investors to do this towards the end of the year, where we are right now, before tax deadlines. Due to increased selling pressure, the market can (and has) seen a downtrend right around the end of the year.
New year brings in New Money 💲
Historically, January has seen upwards price movement due to a few factors…
⁃ Traders re-investing their positions post-tax-loss harvesting in the same or similar assets.
⁃ People are back at work and trading continues as normal, driving liquidity and volume back up.
⁃ Institutions may re-open positions in January due to refreshed capital allocations.
⁃ Retail investors may deploy extra cash from bonuses, year-end savings, etc into the markets.
⁃ A new sense of optimism and a fresh, new year will often bring positive sentiment.
I think we will have a few weeks of negative or consolidating price action for the remainder of 2024. However, in no way do I think this is the top. HODL and DCA your bags, spend time with family and friends during the holidays, and don't panic sell your positions. There is still light at the end of the tunnel, Q1 will treat us well! 🤝
Looking seasonality and comparing the current market to last new cycles, we begin to identify certain patterns.
Time of Year 🗓
During the holiday season, investors can expect lower liquidity, less volume, and overall less activity in the markets as a whole.
Why? Investors and traders, like everyone else, have lives, plans, and traditions they like to spend at home with their loved ones. Typically fund managers and investors will close positions, similar to how schools, offices, and facilities close for 1-2 weeks from the middle of December to the new year.
Tax Loss Harvesting 🛡
This is a strategy used by investors to offset or reduce capital gains owed by selling profitable investments. This is done by selling an asset at a net loss, then using proceedings from a sale to purchase a similar asset and maintain the position.
For example: An investor purchases BTC and recognizes a $5000 gain, but sells ETH for a $3000 loss, which would make them being for taxes on $2000 gain instead of a $5000 gain.
It is common for investors to do this towards the end of the year, where we are right now, before tax deadlines. Due to increased selling pressure, the market can (and has) seen a downtrend right around the end of the year.
New year brings in New Money 💲
Historically, January has seen upwards price movement due to a few factors…
⁃ Traders re-investing their positions post-tax-loss harvesting in the same or similar assets.
⁃ People are back at work and trading continues as normal, driving liquidity and volume back up.
⁃ Institutions may re-open positions in January due to refreshed capital allocations.
⁃ Retail investors may deploy extra cash from bonuses, year-end savings, etc into the markets.
⁃ A new sense of optimism and a fresh, new year will often bring positive sentiment.
I think we will have a few weeks of negative or consolidating price action for the remainder of 2024. However, in no way do I think this is the top. HODL and DCA your bags, spend time with family and friends during the holidays, and don't panic sell your positions. There is still light at the end of the tunnel, Q1 will treat us well! 🤝