The Reverse January Effect: Not as Bearish as it Seems?
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The January Effect is a well-documented behavioural finance phenomenon. It says that, on average, assets tend to rise more in January than the rest of the year. This has been attributed to a number of things: – People assets in January after selling in December (they sold in December for tax-loss harvesting) – Bonuses are paid in late-December/January and people use their bonuses here However, the opposite has been found in crypto, called the reverse January effect. The reverse January effect states that crypto actually does worse on average in January than in other months. Research evidence: – Seasonality in Cryptocurrencies – Found a lack of seasonality in crypto, apart from a reversed January effect – Calendar Effects in Bitcoin – Found a reversed January effect There is fairly strong research evidence to suggest a reversed January effect, but let's also look at the charts ourselves: As you can see out of the 6 years from 2016 to 2021, January has had: – 3 red months – 1 flat month – 2 green months This makes the effect slightly less concerning, especially with the steam that we are currently building before January and the small sample size. Admittedly, a glance at charts is no substitute for a proper statistical analysis, but it can really help put things into perspective. Tl;dr There is no January Effect in crypto, but the Reverse January Effect is not to be feared. submitted by /u/Laughingboy14 |
