Bitcoin and the “Sell in May and go away” seasonality: what the data say

In the realm of financial markets, sayings and proverbs often pass through generations of traders, carrying wisdom gleaned from years of experience. One such saying, “Sell in May and go away,” stems from the early years of the London Stock Exchange and refers to the tendency for U.S. stock markets to exhibit weaker performance during the summer months (May-October) compared to the winter months (November-April).

The saying advises selling one’s positions in May and then re-entering the market in the autumn. This maxim, originally related to traditional equities, might also apply to the world of cryptocurrencies, as evidenced by recent data and the increasing correlation between crypto and macroeconomic cycles.

The tale of two halves: Is May a turning point?

Jeff Mei, COO of BTSE, a leading cryptocurrency exchange, sheds light on the proverb's origin and its potential relevance today.

“The saying ‘Sell in May and go away’ stems from the early days of the London Stock Exchange, later adapted by U.S. investors. It's claimed that U.S. stocks tend to perform poorly between May and October. This could be due to lower trading volumes, less activity from large institutional investors, and a general decrease in volatility during the summer months. As a result, investors were advised to sell their holdings in May and return in the autumn.”

According to Mei, “historically, the coming months have been weak for financial markets, with many investors following the proverb and selling their stocks in May to return in November. However, this year might be an exception.”

This statement is supported by recent data. Bitcoin has already touched $97,000, and some growth-related stocks, such as Nvidia and AMD, are showing signs of recovery after the recent downturn.

Despite this, the latest figures on U.S. GDP show a possible risk of recession, which could be mitigated by potential interest rate cuts later in the year.

The seasonality of Bitcoin

According to data from CoinGlass, a cryptocurrency analytics firm, Bitcoin has often shown weak or negative performance in the month of May in recent years.

There have been exceptions: in May 2019, Bitcoin rose by 52%, one of the best post-2018 performances. However, negative May months are often followed by further declines in June: in the last five years, four out of five June months closed in the red.

Of course, past performance does not guarantee future results, and this year could unfold differently. Nevertheless, these observations suggest that the cryptocurrency market is becoming increasingly sensitive to macroeconomic cycles and seasonality, just like traditional stock markets.

The tale of two halves: Is May a turning point?

As the month of May approaches, some analysts are advising caution, recalling an old saying in financial markets: “Sell in May and go away.”

This expression, originating in the early years of the London Stock Exchange, suggests selling one’s positions in May and then re-entering the markets in autumn, due to the historical tendency for weaker performance during the summer months.

According to a report by Bitget, the saying is linked to the observation that U.S. stock markets usually record lower returns between May and October compared to the November-April period.

This difference in seasonality is attributed to various factors. During the summer months, trading activity tends to decrease, leading to less price pressure and potential for significant gains. Moreover, large institutional investors, who play a crucial role in market movements, are typically less active in the May-October period.

Finally, during the summer months, macroeconomic events and news cycles tend to slow down, reducing volatility and the frequency of sharp price fluctuations.

The saying "Sell in May and go May" advises selling positions in May and returning to the markets in the autumn, when these trends are expected to reverse.

"The advice to 'Sell in May' is a maxim that has been passed down through generations of investors, suggesting selling around the month of May and returning to the market in the autumn," explains Vugar Usi Zade, COO of the cryptocurrency exchange Bitget.

"According to observations since 1950, the S&P 500 has recorded an average gain of just 1.8% from May to October, with positive returns only 65% of the time. In contrast, from November to April, the average gain is 10.5%, with 80% of periods in the black."

While this data refers to the stock market, it can be relevant for understanding how investor sentiment, which is a key driver of market trends, tends to vary throughout the year.

"The saying 'Sell in May and go May' is a product of a different era, when the market structure and investor behavior were different," adds Zade. "In today's rapidly changing crypto market, it's best to rely on advanced technical analysis, fundamental data, and personal risk tolerance