“Sell in May, and go away” is an oft-heard phrase amongst equity investors. Its truth has been borne out by years of study of the historical record. The presumption is that traders and investors alike prefer to take holiday after May, returning some time in September to resume their daily regimens. During that period, volumes drop. Returns ebb in the low digits, and nothing really happens until vacationers are back at their respective desks. Can the same be said about Bitcoin? Researchers say: “Yes.”
Analysts poured over the crypto historical for the past decade and came away with this startling result – the only two months that display a negative return for the entire period are – you guessed it – July and August. They also discovered another corollary, which posits that, if June records a negative return, then the negative momentum will carry over into July 75% of the time. We are but a third of the way into June, but Bitcoin has already been beaten back by 9% down to $7,800. If BTC continues in this vein, then the odds favor a deeper correction in the ensuing month.
In the past month, there has been a cacophony of deafening alarm bells from the crypto analyst community that a major correction was inevitable. This prediction has been echoed so many times that it almost sounds as if there might soon be a new episode of “Game of Thrones” entitled ”A Correction is Coming”. Bitcoin did peak over $9,000 twice in the past month and was repulsed severely each time. Analysts claim that there is a huge block of sell orders just above this level that will thwart any ill-conceived attempt at penetrating its formidable resistance.
Bitcoin has been range-bound for the past two weeks, supposedly licking its wounds and regaining its strength for the big assault down the road. There is a contrarian’s opinion that states that Bitcoin cannot gain the strength it needs, unless it corrects by 30%+. The move would be healthy and attract a host of new investors, ready for the kill. This theory also stipulates that $7,400 is the key level to watch. If BTC closes below this figure for one or two days, then the next stops will be a pause at $7,000 before plummeting down to $5,800. Whales and institutional investors are itching for bargain prices and would swoop in to swallow up all sell orders, or so the story goes.
The “Summer Month Hypothesis” seems to play into this type of thinking, but all of these suppositions are based on previous Bitcoin pricing behavior. If BTC has demonstrated anything in its short history, it is that it is unpredictable. Its infrastructure of fundamental drivers beat to a dynamic of a different drummer. Predictions based on technical analysis usually have probabilities attached, a type of disclaimer that reflects that even the best analysis of patterns, lines of support and resistance, and waves is not a guarantee of future performance.
Having said these words of wisdom, it is interesting to note another finding of the historical record researchers: “Months like March, April, and October have positive returns in the hundreds of percent”. Perhaps, traders and investors should stay on holiday one more month and not return until October.