Portrait of the Market
"January Effect" or End of the Crypto Winter?
Bitcoin and other crypto assets had a harsh 2022, exacerbated by bankruptcies and forced liquidations, after having all-time highs in 2021. But the beginning of 2023 has seen quite the opposite. Many have seen significant rebounds to start the year.
This leads to the question, is this the end of the recent crypto winter, or just the "January Effect"?
Jeremy Grantham, co-founder of investment firm GMO, believes that the recent gains can be attributed to what he calls the “January Effect”. Meaning, speculative investments tend to see movement this time of year because investors will pile in excess cash from tax-loss selling and end of year bonuses into the most beaten down assets from the previous year.
He could be onto something. If we look at the Bitcoin price from 2015-2022, we see that in just the first 10 days of the Lunar New Year (which typically occurs in January and February) Bitcoin has an average return of nearly 10%.
While many feel that Bitcoin and crypto assets are finally turning the corner, it is yet to be seen if this is a reversal in a cyclical trend or just the "January Effect".
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