Timothy Peterson, a seasoned expert in cryptocurrency analysis, recently shared his insights on the sharp decline Bitcoin experienced towards the end of the year.
Peterson highlighted several factors that contribute to bear markets often reaching their lowest point in December. A primary reason is linked to the US tax regulations. He explained that investors tend to sell off underperforming assets before year-end to offset gains made throughout the year, thereby lowering their overall tax liability. This collective selling pressure tends to push market prices downward during this period.
While traditional markets enforce a 30-day “wash sale” rule preventing immediate repurchases for tax benefits, Peterson pointed out that cryptocurrencies are not bound by this regulation. Nonetheless, similar selling patterns emerge within Bitcoin and broader crypto markets as investors act on comparable incentives. When reminded about this by a follower, he confirmed that December’s selling momentum is strong in crypto but typically fades once January begins.
The analyst further explained that after New Year’s Day, there’s no longer a tax advantage driving these sales. Instead, many investors who trimmed their holdings at year-end seek to re-enter positions early in the new year. This behavior fuels what is known as the “January effect,” where professional traders rebalance portfolios and often trigger price recoveries during January.
Peterson also suggested some institutional players might delay buying Bitcoin until early January, potentially sparking a modest rebound rally shortly after the calendar flips.
Please note: This commentary does not constitute financial advice.