The Aristocrat's Guide to Crypto Trading

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Author: Yun Bai & Daniel Seiler

Date: May 10, 2024

The saying "Sell in May and go away" has its roots in an old English tradition. It suggests that people should sell their stocks in May, take a break, and return to the market around mid-September. This tradition originated from aristocrats, rich merchants, and bankers who left London during the hot summer months, returning after the St. Leger's Day horse race. I mean, who else had money to invest.

Over time, this saying became a simple investment advice or a trading rule that investors could follow to potentially avoid seasonal declines by selling in May and re-entering the market later in the year.

I've always been skeptical about these seemingly simplistic rules. They just don't seem to add up logically. So you can imagine my surprise when I delved into the pattern in the Swiss stock market and found it to be statistically significant over the last 50 years! Probably, more coincidence than indicative of genuine causation.

Interestingly, Bitcoin enthusiasts have also delved into this age-old aristocratic trading adage, which might appear antiquated in today's fast-paced world, wouldn't you agree? (See chart below.) Examining the data from 2018 to 2023 reveals that Bitcoin experienced negative performance in May in 4 out of 6 years, while September led with the most negative performance—5 out of 6 Septembers. Additionally, the average performance during these periods seems to align with the trading rule, albeit not significantly. And again the question: is this merely coincidence or a meaningful correlation?

Prices Chart

In the midst of the depicted return data, Cathie Wood's Ark Invest made waves this week by offloading its Coinbase shares. While Wood has been vocal about blockchain's potential to transform various industries, Ark's recent decision to unload Coinbase shares, a stock closely tied to Bitcoin's fluctuations, raises eyebrows. It begs the question: Is Wood sticking to her strategic vision, or imply following the 'Sell in May' advice? This is especially true since ARK maintains its projection of Bitcoin reaching $1.5 million by 2030, i.e. an ambitious growth of more than twentyfold within six years.

Projecting this kind of future and considering the current enthusiasm surrounding Bitcoin, particularly with the recent ETF launch, one might understandably be skeptical about ARK's decision to sell Coinbase. However, upon closer examination, despite the excitement, negative sentiments have surfaced since Bitcoin's peak in late March, nearing $74,000. Faced with uncertain future market conditions, Cathie Wood seems to be navigating with a blend of calculated decisions, drawing from her disruptive vision for the future and perhaps even considering a trading rule dating back more than a century.