- The saying ‘sell in May and go away, come back on St. Leger’s Day’ is well known in investment circles
- The saying reflects the typical underperformance of stocks between May and October
- How does the adage work with crypto, and are things different this year?
Many who have skirted the investment world for any length of time may have come across a well known saying – ‘sell in May and go away, come back on St. Leger’s Day’. The saying relates to the supposition that the stock market performs poorly between May and October compared to the other half of the year, and has its roots in the London stock market of the 18th and 19th centuries. How does this saying fit with the crypto markets, and is it worth following this year in particular?
Selling Crypto in May is a Mixed Bag
St Ledger’s Day refers to a famous horse race in England that takes place at the end of October and which began in 1776, leading to historians thinking that the ‘sell in May’ phrase came about shortly after. Forbes has called the historical accuracy of the phrase “remarkably strong”, but how does it fit with the cryptocurrency markets?
Looking at the data since 2014, we can say that the idea of selling in May and buying back in October has been a mixed bag, depending entirely on where the timeframe falls in the crypto cycle – selling in May 2014, 2018, and 2021 and buying back the following October would have been beneficial, but the reverse would have held true in the other years.
Is 2022 Different?
2022 is something of a special case, with Bitcoin being in a kind of no-mans land, with expectations of an imminent pump and an imminent dump equally as widespread. This is in part due to the efforts being made by the Federal Reserve to rein in inflation, which many believe is having an impact on risk-on assets such as Bitcoin.
Just yesterday the Fed’s chair Jerome Powell said that the agency would essentially stop at nothing to bring inflation back down to its target of 2%, a 75% reduction from its current figure. The likely impact will be continuous interest rate hikes through the summer, with September being seen as the crucial time when the Fed will either ease off or, if their efforts aren’t working, go nuclear:
The path of US monetary policy is pretty much decided until September.
The Fed is set to increase rates by 50bps in the upcoming two FOMCs, evaluate data in the meantime, and decide on September if to hike even faster (or do the opposite) and/or start to actively sell assets.
— Alex Krüger (@krugermacro) May 16, 2022
With investors therefore set to play a waiting game throughout the typically quiet summer months, this has led to predictions that the cryptocurrency markets will simply range between key support at $30,000 and key resistance around $47,000 over the next 5-6 months. Unless a huge catalyst comes along to drive price upwards, it is likely that a period of drifting and accumulation will take place until the Fed decides that it has inflation under control.
HODL in May, All the Way
To return to the question posed at the top of this piece – should you sell in May and go away? Unless you are worried that the crypto market is on the verge of entering a multi-year bear market then the answer should be no. The best thing to do in an uncertain scenario such as the one we are facing over the next few months is to just hold what you have and don’t make any further moves until the market direction becomes clearer.
Keep some powder dry in case we have a dip, but otherwise just lock away your crypto and forget about it for the next five or six months.
What you can practice is a kind of mental sell off. Set two Bitcoin price alerts on your app of choice, one for $24,000, which is the next support under $30,000, and one for $43,000, which is an important resistance level on the way up. Have a plan for these two levels, wait to see which one hits first, and execute it. Anything in between is just going to be chop that it’s not worth bothering with – get outside and enjoy the summer and let the market work itself out.
Here’s our alternative saying that should be your guiding light this year:
HODL in May, buy and pray, if Bitcoin hits 24k.