As spring turns to summer and the markets shift, investors may have heard the commonly heard adage of “sell in May and go away.” The idea is that since the summer months tend to be less active in the markets due to vacations and other seasonal factors, it is better to step back from investing and wait until the fall to resume trading.
But is this strategy actually effective? And how does it apply to the world of cryptocurrency, where markets are notoriously volatile?
We asked a panel of crypto experts to weigh in on whether investors should sell in May and go away when it comes to cryptocurrency investments.
Overall, the consensus among our experts is that this is not a strategy that necessarily applies in the same way to cryptocurrency as it does to other markets.
“Sell in May and go away is an antiquated investment rule that’s been used in traditional markets to help investors avoid the expensive summer months when they’re traveling and spending more money,” explains Azamat Sultanov, CEO of Zenchain.
“However, this rule doesn’t apply to cryptocurrencies since the market is already volatile year-round.”
Indeed, the cryptocurrency market has been known to experience significant fluctuations regardless of the time of year. In recent years, it has seen major price movements both up and down during the summer months.
“Crypto is a new asset class that has historically been less correlated with other asset classes. As such, using old market adages may not be applicable in this new market,” notes Mark Engebretson, Founder and CEO of Paulo Capital.
“This year, in particular, has already seen significant volatility in the cryptocurrency markets, with both Bitcoin and Ethereum seeing multiple 10-30% moves in a single day. With that kind of volatility, the “sell in May and go away” strategy may not be effective,” he adds.
Instead, our panel suggests that investors should approach cryptocurrency investments with a long-term strategy, rather than trying to time the market based on seasonal trends.
“Investing in cryptocurrencies requires a long-term strategy. A substantial portion of your portfolio should be invested in Bitcoin, Ethereum, and Binance Coin,” advises Rachel Siegel, creator of CryptoFinally.
“With a long-term investment plan, there will always be market corrections, volatility, and price dips, but ultimately, these seasonal adjustments are less important than the trend of the asset class over time,” she adds.
Additionally, the experts we spoke to noted that there are other factors beyond seasonal trends that can impact cryptocurrency prices. For example, regulatory changes, geopolitical events, and technological advancements can all play a role in the market’s movements.
“Cryptocurrency markets are complex and highly influenced by a variety of factors beyond simple seasonality,” explains Chris Cory, Founder and CEO of SafeDepositary.
“Factors like changes in regulation, uses of blockchain, and adoption can all play into market movement. Rather than following outdated sayings, investors in cryptocurrency should focus on staying informed and making informed, long-term investment choices,” he adds.
Ultimately, while the “sell in May and go away” strategy may have some merit in other markets, it is not a one-size-fits-all approach that necessarily applies to the volatile world of cryptocurrency. Instead, investors should focus on building a diversified portfolio and taking a long-term perspective when it comes to their cryptocurrency investments.
The “Sell in May and Go Away” strategy is well-known in traditional asset classes, but does it work in the cryptocurrency market? This is the question that Gracy Chen, Managing Director of Bitget, and Robert Quartly-Janeiro, Chief Strategy Officer of Bitrue, have sought to answer.
Both experts agree that the strategy may not work well in the cryptocurrency market. Chen highlights how the Web3 technology is continuously evolving, creating new trading opportunities that may be missed if not actively monitored. Additionally, she notes the short-term perspective where Bitcoin’s higher volatility comes with the potential for higher profits, making the “Sell in May” strategy less effective.
Quartly-Janeiro adds that the “Sell in May and Go Away” strategy lacks consistency in the crypto market. For example, although Bitcoin fell in 2018, it surged in 2017. He points to factors such as seasonal fluctuations in consumer spending, corporate earnings, and investor sentiment that influence this strategy.
The past year has also impacted the crypto market. The events of 2022 saw the market lose over $2 trillion in market capitalization, causing institutional investors to exit the market. Chen believes that the industry is likely to remain in a liquidity-strained environment for a while, but expansion of financial giants into the cryptocurrency space could create a path for institutional funds to re-enter.
Quartly-Janeiro emphasizes that the crypto industry is not isolated from macroeconomic factors, and excessive leverage can impact institutions and markets. Therefore, sustainability relies on delivering real-world utility and value.
Ultimately, the decision to sell or hodl is up to individual investors. Chen and Quartly-Janeiro recommend conducting one’s research to make informed decisions that align with investment goals.