‘Sell in May and Go Away’: The Seasonality of Crypto-asset Returns

Obviously, time plays an important role in Bitcoin’s protocol. But what about the seasons?

As a financial analyst, I’ve observed and studied the market trends closely, and I can confirm that traditional finance research presents compelling evidence of seasonal patterns in equity returns. These phenomena are commonly referred to as the “January Effect” and “Turnaround Tuesdays.” The January Effect implies higher returns in the first month of the year, while Turnaround Tuesdays suggest that Tuesdays may bring about positive reversals for underperforming stocks.

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Significant seasonal trends can be detected across various time frames, including quarters, months, weeks, days, hours, and more.

As a researcher studying historical equity market trends, I’ve discovered that the adage “sell in May and go away” has been a popular one since the 19th century. This recommendation stems from the observation that, on average, the summer months have exhibited weaker equity returns compared to other months throughout history.

Examining Bitcoin’s monthly average returns, it is noticeable that the summer period from June to September has consistently demonstrated below-par returns compared to other seasons.

Why should we care about this?

If I had merely kept my crypto investments in cash during the summer months from August to September while I was taking a break, but remained fully invested in Bitcoin for the rest of the year, my returns would have been four times greater than a simple Bitcoin buy-and-hold strategy!

Based on statistical analysis, identifiable seasonal trends in performance could potentially yield substantial returns.

Additionally, the historical trend indicates that Bitcoin may experience significant gains from now until around June. Afterward, there might be a brief respite during the summer months before the cryptocurrency continues to climb toward the end of the year.

As previously discussed, seasonal trends are noticeable across various time scales.

In the given situation, Bitcoin has generally shown superior gains from the start of the week (Mondays to Wednesdays) compared to its less impressive performance during the latter part of the week and particularly on weekends.

During different time zones, similar trends are noticeable in Bitcoin trading: The Asian market hours from midnight to 6 am UTC generally exhibit below-par results. Conversely, European hours from 8 am to 4:30 pm UTC and American hours from 2:30 pm to 9 pm UTC have typically yielded above-average returns. However, it’s important to note that the final hour of the American trading session (9 pm UTC) has seen historically poor Bitcoin returns.

Intradday similarities in price behavior can be noted in the conventional foreign exchange market, which experiences a significant volume of transactions during the overlap of European and American trading sessions, roughly between 15:30 UTC and 16:30 UTC.

Bitcoin is continuously traded worldwide, yet its price changes primarily result from human actions. Consequently, the adage “sell in May and go away” appears to hold true for Bitcoin’s performance as well.

Bitcoin functions consistently, but its success is influenced by our waking hours and work schedules, as well as times when many of us are away on vacation or not actively engaged in work.

Tick, tock, next block.

This is not investment advice.