The Temporalities of Bitcoin Returns
By Greg Cipolaro and Kevin Kaltenbacher, CFA
In our continuing analysis of bitcoin returns, we look at returns by month, day of the week, and hour of the day. With the caveat that past performance is not indicative of future performance, our analysis of historical returns by month shows interesting patterns, with strong performance in the spring and early summer months, the fourth quarter, and the month of February. Historical periods of weak price performance on average include the late summer to early fall period, plus the month of March. It appears that bitcoin returns are affected by similar summer seasonality as traditional financial markets, as well as some factors idiosyncratic to the digital asset ecosystem. Examining returns by day of the week, we find a pronounced pattern of outperformance on Fridays and the beginning of the week, which dissipates as the week goes on. We have several working theories as to why Fridays are strong – pay cycles, automatic purchase plans, the timing of market-moving news, and the impact of CME futures trading, but no strong conclusions. Regardless, we think it is a timing factor that investors should be aware of. We believe the start of the week is strong because the traditional banking system is closed over the weekend and Sunday night (Asia’s Monday morning) and Monday are the first times that fiat can move onto exchanges. Our analysis of hourly returns finds little of note, although deeper market inspection around specific events may be of interest for future research.
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