Bitcoin to Experience Third Consecutive Negative Quarter First Time Since 2015
While there’re still two weeks to go before the end of the first quarter of the year, predictions about Bitcoin’s performance this quarter are already being made.
The economic downturn caused by the coronavirus outbreak has hit the crypto industry hard. However, despite having lost more than $74 billion in the past month, the crypto market seems to have entered a consolidation phase, with most coins experiencing slight growth in the past 24 hours. Bitcoin managed to defend its critical support level of $5,000 and is trading at around $5,200 at press time.
Graph showing the total market capitalization of the crypto market in the past month
The massive downturn the market has experienced has put the focus of most traders to hourly and daily candles. However, zooming out tends to show a better picture of how Bitcoin has actually been performing and offer valuable insights into where it might be heading.
Bitcoin’s quarterly performance, for example, has been used to show certain trends in the market and help predict how it might act in the following weeks.
According to data from Skew Research, Bitcoin has shown losses in Q1 of 2014, 2015, 2016, and 2018, recording quarterly returns of -39%, -23%, -3%, and -50%, respectively. Down almost 30% this quarter, Bitcoin could be set for another underwhelming Q1, the data show.
If history repeats itself, Bitcoin has a very large chance of experiencing a significant rally in Q2 – the coin only saw a negative return in 2018.
Table showing Bitcoin’s quarterly returns from 2014 to 2020. (Source: Skew Research)
But, diving deeper into Bitcoin’s quarterly performances shows that it might not be that easy to predict how it might behave in the next three months.
This is due to the fact that Bitcoin will most likely experience three consecutive negative quarters. If the world’s largest cryptocurrency doesn’t rally until the end of the month, this will be the first time it recorded a third consecutive negative quarter since 2015.
Data from Skew show that Bitcoin saw losses of 39% in Q3 2014, 17% in Q4 2014, and 23% in Q1 2015. Since then, it recorded negative returns in only 8 quarters.
While the data might indicate that it’s more probable that Bitcoin will see a rally next quarter, it’s important to note that the circumstances in which it rallied were much different from the previous years.
Earlier this week, the Federal Reserve embarked on an ambitious quantitative easing spree, injecting $700 billion into the U.S. economy to shelter it from the effects of the ongoing pandemic. The Fed has also cut its funds rate, which is used as a peg to many consumer interest rates, to essentially zero.
For Bitcoin, the current economic climate looks a lot like the beginning of the 2008 financial crisis, with many analysts arguing that the world’s first cryptocurrency was made for times like these.