Detrending Explained: Seeing Past the Overall Trend

Here's a puzzle: if you look at Bitcoin's seasonal data over the past several years, almost every month shows a positive average return. Does that mean Bitcoin has no seasonal "weak" months at all?

Not quite. It means Bitcoin's overall trend — its long-term average growth — has been so strong that it dominates the picture, making it hard to see which months are relatively stronger or weaker than its own typical month. This is exactly the problem detrending solves.

The problem with raw averages for high-growth assets

Imagine an asset that has averaged +5% per month overall over the past several years. If one particular month averages +3%, is that a "good" month or a "bad" one?

In absolute terms, +3% is positive — nobody would call it a loss. But relative to this asset's own typical month of +5%, a +3% month is actually underperforming by 2 percentage points. It's a weaker-than-usual month, even though the number itself is positive.

A worked example

Suppose an asset's 12 monthly averages, before detrending, are mostly between +3% and +7%, with an overall average of +5%/month. After detrending:

Both months were positive in absolute terms. But detrended, one is "2 percentage points above this asset's typical month" and the other is "2 percentage points below" — revealing the actual seasonal shape that was hidden inside the overall uptrend. ("pp" stands for percentage points, the unit detrended values are expressed in.)

When detrending matters most

Detrending is most useful for assets that have had a strong overall directional trend — up or down — over the analysis period:

• Bitcoin and other cryptocurrencies, which have had enormous overall growth over most multi-year windows.
• High-growth tech stocks (e.g. companies like Nvidia during major growth phases) where almost every month looks "good" in absolute terms.
• Assets in a sustained downtrend, where almost every month might look "bad" in absolute terms, masking which months were relatively less bad.

For assets with relatively flat long-term performance — many broad indices over certain periods, for example — detrended and raw views often look fairly similar, since there's less overall trend to remove.

What detrending doesn't change

Detrending doesn't change the win rate — the percentage of years a month was positive — since that's about direction (up or down), not magnitude. It also doesn't change the underlying data; it's a different lens on the same historical returns, designed to answer a different question: not "was this month profitable?" but "was this month strong or weak for this asset, specifically?"

Reading a detrended chart

When you toggle on detrending, look for:

• Which months are above zero — these are relatively strong months for this specific asset, regardless of the overall trend.
• Which months are below zero — relatively weak months, even if they were still positive in absolute terms.
• The spread — how far apart the strongest and weakest months are. A wide spread suggests a more pronounced seasonal shape; a narrow spread suggests the asset behaves fairly similarly month to month.