Kraken – Bitcoin Generates Negative Returns in September
The US based cryptocurrency exchange Kraken, in its August 2020 volatility research report, has forecast negative returns from Bitcoin (BTC) investment in September.
The document published by Kraken has pointed out that time and again, Bitcoin used to perform in a worst manner in September, with long-term returns of negative 7%.
The report further argues that the returns are going to much worse this time as the numero uno crypto has underperformed its long-term average returns this year.
In spite of the short-term bearish view, the report has found ray of light, for instance a huge portion of Bitcoin’s supply has not moved from their wallets for more than one year. Kraken has opined that “historically, this dynamic has foreshadowed a new bull market.”
The report further states that Bitcoin’s price will soon undergo extreme volatility as the markets stray away from July nader or “suppressed pocket” for volatility:
“Twelve times in the past, Bitcoin’s annualized volatility bottomed between 15% and 30% before climbing, on average, to 140% and returning +196% over 94 days. As of the end of August, 38 days have passed since the volatility low of 23% set on July 24, with volatility rising to 44% and price gaining +25%.”
The report further states “So, history indicates that we may have ample room for higher volatility and gains in the months ahead.”
Kraken also underlines that September is characterized by weak volatility of Bitcoin, implying that the crypto many trade in a tight range under the beginning of 4Q20.
Nevertheless, Kraken’s forecast is not a proven one. In fact the exchange had forecast on August 10 that Bitcoin could rally between 50% and 200%. At that time, Bitcoin was trading between $11,500 and $12,000, and the forecast didn’t turn out to be true.
The report also highlights the record correlation of 0.97 between Bitcoin and gold achieved in August, before falling to 0.25. It can be remembered that Bitcoin had a similar correlation with S&P 500 in August.
Bitcoin touched a peak correlation of 0.84 with S&P 500 before plunging to 0.02, implying that Bitcoin may continue to move in tandem with any major asset but not remain correlated for long-term.