Originally published on: August 07, 2024
Bitcoin’s recent 20% flash crash that saw prices plummet to $49,050 has left investors on edge as the annual “ghost month” begins. This spooky period, observed from Aug. 4 to Sept. 2 this year, has historically brought bad luck to Bitcoin prices, especially in Asian markets.
The concept of a ghost month, based on the Chinese lunar calendar, has been linked to negative returns for Bitcoin since 2017. Despite the lack of concrete evidence showing a direct correlation between cultural beliefs and market performance, the start of the ghost month tends to influence investor sentiment and profit expectations.
Past ghost months have seen Bitcoin experience significant drawdowns, with the only exception being 2021 when prices rallied before a steep 23% decline marked the beginning of a bear market.
Traders have shown caution as the current ghost month kicks off, indicated by a decrease in Bitcoin open interest and a record number of coins being sold at a loss.
While recent market conditions have been turbulent, Bitcoin’s market value to realized value (MVRV-Z) score suggests that the asset is still undervalued. With the current ratio at 1.40, below the overvaluation threshold of 3.7, Bitcoin may have room for growth in this market cycle.
Despite the recent recovery to above $57,000, Bitcoin’s volatile nature during the ghost month could lead to further price fluctuations in the days ahead. Investors are advised to conduct their own research and exercise caution when making trading decisions in such uncertain times.
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