The month of May is off to an eventful start in the cryptocurrency market. Investors are increasingly selling, as evidenced by the recent performance of Bitcoin ETFs. A reality which brings a question back to the agenda: the stock market adage of “ sell in May and go away “, or does selling in May on the stock market apply to cryptocurrencies? Here is my opinion on the subject.
A look back at the popular stock market adage of “sell in may and go away”
Literally “sell in May and leave”the famous stock market adage of “sell in may and go away” has long remained a principle adopted by many investors. This is a saying used to invite holders of risky assets such as stocks to liquidate their holdings as early as May.
In reality, its origins are much more distant, having appeared around the years 1776 in old England. Tradition has it that at this time, brokers went on vacation from May to September, a period coinciding with the departure of members of the upper class from the city of London.
However, it was a little later that this quote found the meaning we give it today. According to an approach cited in the Stock Trader's Almanaca dedicated work devoted to investors, the period covering the months of November to April encompasses the “six best months of the year”.
This estimate is based precisely on the performance of the Dow Jones Industrial Average which tends to perform in this time interval. Thus, from the month of May, this theory recommends the sale of risky assets, so that investors return to less risky assets from May to October.
Historically, this principle has proven correct in certain cases. Taking the example of the S&P 500 index in the United States, we can see two phases of stock growth since 1990. Average growth of more than 7% is noted from November to Aprilthen a growth rate of 2% is retained on average from May to October.
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Since its beginnings, the adage “sell in may and go away” has remained historically linked to the stock market sector. That said, with the emergence of cryptocurrencies, including bitcoin in particular, analysts are increasingly starting to associate the saying with this new asset class.
Past performance of the crypto market in May-June
Over the past decade, the cryptocurrency market has gained momentum, attracting many investors. Which gave rise to some comparisons with the stock market sector. Two markets that do not agree on several points, particularly in terms of volatility.
However, one of the similar points that has come up the most in this debate in recent years is the behavior of the cryptocurrency market in May-June. Indeed, like stock market assets, crypto-assets tend to underperform at this time of year.
To better illustrate this, we will consider the bitcoin performancewhich are often linked to price movements of other assets such as Ethereum.
Thus, according to a review of the crypto's average monthly returns carried out by ETC Group, it was revealed that from June to September, its performance is significantly down. This with the start of regression generally observed during the month of May.
Source : ETC Group/Glassnode/Coindesk
By better analyzing the results of this examination, we notice that the BTC price tends to plunge in August and September, before resuming high performance levels from October.
In addition, another study carried out in 2023 by Brave New Coin reveals that June, August and September were the weakest months for bitcoin. Since 2011, the average monthly return of BTC covering the period from the beginning of June to the end of September has been around 2.7%.
Which is significantly lower than the yield of 19.3% recorded during the other eight months of the year. Analyzes which bring us back to our initial adage, announcing in a certain way a sensitivity of cryptocurrencies for the period of the year covering May to October.
So, does the stock market saying “sell in may and go away” ultimately apply to the cryptocurrency market?
In view of the data presented previously and the history of the bitcoinas well as that of the cryptocurrency market as a whole, we note that the association of the adage “sell in may and go away” with this sector has a certain relevance.
However, this is not enough to normalize cryptocurrency sales in May. According to some experts, the strategy of “ buy and hold » would be much more interesting at this level, because it offers better long-term results.
In addition, it should also be noted that several factors can always impact the price of crypto currencies. This is particularly the case of BTC halvingan event whose history is always associated with a market bull-run.
The same goes for the strong interest shown by traditional entities in the world of finance, increasingly leading to a structural transformation of the sector. With the Bitcoin ETF and the macroeconomic deadlines that come into play, it would be wise to analyze the market carefully before taking a position.
While it started this month of May with a significant fall plunging it up to $53,000, bitcoin has since recovered. It recorded growth of 2% in 24 hours, exchanging up to $64,170 at the time of writing these lines.
Having also been impacted by this correction, Ethereum, Solana And BNB also follow the movement, with respective gains of 1.58%, 1.80% And 3.94% over the last 24 hours.
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