The Wolf Den #957 - Should You Sell In May?
And Go Away?
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In This Issue:
Should You Sell In May?
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Lightning Strikes At Coinbase
Hong Kong Hype Falls Short
The Other Flippenings
Rapid Fire News
Bitcoin Is Falling | Crash Or Correction?
Should You Sell In May?
"Sell in May and go away" is an old stock market adage warning investors to sell their holdings in May to avoid a seasonal decline and return in November. But does this strategy hold water for Bitcoin?
I took the bait and pulled up the receipts, so you don't have to.
When examining Bitcoin's performance across various months, we observe a varied pattern. For May, the performance is almost evenly split with 6 out of 11 Mays showing declines (red) and 5 showing gains (green), suggesting it's quite unpredictable.
Comparatively, November and December have seen more reds than greens, with November showing gains only 4 out of 11 times and December 5 out of 11 times. In contrast, February appears to be a strong month for Bitcoin, with gains in 10 out of 12 instances.
Looking at other months, June, September, and October offer additional insights. June has a near-even split similar to May, with 5 reds out of 11. September has consistently shown declines, with 8 out of 11 months being red. October, on the other hand, seems favorable, with only 2 out of 11 months showing declines.
Given this mixed monthly performance, analyzing Bitcoin's trends by quarters may indeed provide clearer insights into its cyclical behavior. This could help in identifying more consistent patterns in its price movements over the years.
Q1: Evenly split, with 6 out of 12 quarters showing declines.
Q2: Slightly more favorable, with 5 out of 12 quarters ending in the red.
Q3: Tends to struggle, with 6 out of 11 quarters showing declines.
Q4: Appears to be the strongest quarter, with only 4 out of 11 quarters experiencing declines.
To extend this analysis, examining Bitcoin's annual returns could shed more light on its long-term trend and offer a broader perspective on its performance throughout different market cycles.
Evaluating Bitcoin's performance reveals that only 3 out of 12 years have been negative, underscoring that, despite appearances, 2024 continues to be a strong year for Bitcoin.
However, the belief in rigid seasonal patterns in cryptocurrencies, much like in traditional financial markets, seems questionable. Historically, these patterns were often linked to agricultural cycles, but as the significance of agriculture in the economy has waned, so too has the impact of these patterns. Modern investment fluctuations are more likely driven by factors like financial industry bonuses and the U.S. tax season.
The old adage 'Sell in May and go away' might no longer be effective—if it ever was. The theory suggests that investors could slightly outperform by avoiding the market from May to October, but in a market as volatile and unpredictable as cryptocurrency, such strategies might quickly become obsolete due to arbitrage. Summer may be consistently boring for Bitcoin, but timing the reentry is nearly impossible.
This article from Cryptonews.com stated, “According to a study by Barron’s, if you would have sold your equity portfolio at the end of May to re-enter the market in October, you would have generated 0.7% more returns on average than investors who stayed invested during that period over the past 30 years.”
Considering the broader market context is essential. For instance, Bitcoin just saw its longest green streak since January 2013, with seven consecutive months of gains leading up to a modest pullback in April. This kind of momentum illustrates the importance of underlying market conditions over simplistic seasonal strategies.
Look at these figures: September +3.91%, October +28.52%, November +8.81%, December +12.18%, January +0.62%, February +43.55%, March +16.81%.
What a bull market!
Moving forward, much will depend on where we are in Bitcoin's 4-year cycle, the current market sentiment (bullish or bearish), and the performance in the preceding months. Upcoming events like the May ETF decision could also play a crucial role.
Regarding the altcoin market, much depends on Ethereum's performance, which often acts as a barometer for the sector. A downturn in Ethereum could signal troubles for smaller coins, which have been getting slaughtered in this downturn.
Ultimately, my view is that we are still in a bull market, and the conditions are ripe for significant gains, especially for major cryptocurrencies like Ethereum and Solana, which have the potential to hit new highs. For investors, this might be a good time to consider positions in altcoins missed earlier, while others might do well to hold steady and watch for strategic opportunities aligned with long-term goals.
Trading in this environment requires caution and a strategic approach. Avoid getting swept up in market noise and focus on informed, data-driven decisions. We ARE still in a bull market - stay focused on that..
Bitcoin Thoughts And Analysis
Bitcoin lost the range support and retested range lows as resistance. There is nothing but air until around $52,000 on the chart.
My biggest concern I have been discussing for months (in newsletter) is that RSI never made the trip to oversold. Almost there now, all lower time frames oversold.
This is still ONLY A 23% correction, very shallow for a bull market and consistent with other corrections on this run. We are yet to see a 30-40% pull back during this bull market, like those of the past.
Altcoin Charts
For those who are new here, I share SETUPS and not SIGNALS. These are ideas that I am watching - if a certain thing happens, then the trade triggers. I am not telling you what to buy or when. I am showing you how I am watching certain charts and what has to happen for me to take a trade.
As mentioned above, ETH price action has been viewed as a signal for the rest of the altcoin market in past cycles.
I just wanted to share the main weekly support levels, in case this correction continues. These black lines are the areas that we could likely see interest in Ethereum.
Out of sheer boredom, I clicked on my old favorite indicator, the Ichimoku Cloud. Without going into too much detail on how it works. I can say that those who use this strategy should be salivating at ETH at the moment.
The flat cloud top (kumo) is considered strong support - this is the third test. The brown line, or Kijun, is also viewed as a support level for an entry.
Interesting…
Legacy Markets
Stocks dropped amid concerns about persistently high U.S. interest rates, with market attention focused on the upcoming Federal Reserve policy decision. The market sentiment was cautious in a trading session with reduced activity due to holidays. U.S. stock futures and European stocks declined, reflecting expectations that the Federal Reserve might maintain high interest rates due to recent economic data suggesting inflation remains a challenge. The dollar remained stable and two-year Treasury yields were close to a six-month high, indicating anticipation of a possible hawkish stance from Fed Chair Jerome Powell.
Brent crude oil prices fell for the third consecutive day, influenced by prospects of a ceasefire in the Middle East and data indicating rising U.S. crude inventories, which may dampen demand as inflation concerns persist. In corporate news, Tesla's stock declined after significant cuts to its Supercharger network, while Amazon saw gains from strong sales in its cloud division. Advanced Micro Devices shares dropped following a weak forecast for its AI processors.
Additionally, there's increasing pessimism in bond markets, with data showing hedge funds are building short positions in anticipation of continued high rates. Investors are also pulling back from local-currency bonds in emerging markets as some central banks face pressure to raise rates, resulting in a notable decline in these assets.
Key events this week:
Holiday across much of Asia and Europe, Wednesday
Treasury’s quarterly refunding announcement, Wednesday
US ADP employment change, JOLTS job openings, ISM Manufacturing, Wednesday
Federal Reserve rate decision, Wednesday
Eurozone S&P Global Manufacturing PMI, Thursday
US factory orders, initial jobless claims, trade, Thursday
Apple earnings, Thursday
Eurozone unemployment, Friday
US unemployment, nonfarm payrolls, ISM Services, Friday
Chicago Fed President Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.5% as of 5:40 a.m. New York time
Nasdaq 100 futures fell 0.8%
Futures on the Dow Jones Industrial Average fell 0.3%
The Stoxx Europe 600 fell 0.1%
The MSCI World index fell 0.1%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0672
The British pound was little changed at $1.2491
The Japanese yen was little changed at 157.92 per dollar
Cryptocurrencies
Bitcoin fell 4.3% to $57,303.8
Ether fell 2.9% to $2,875.86
Bonds
The yield on 10-year Treasuries was little changed at 4.69%
Germany’s 10-year yield advanced five basis points to 2.58%
Britain’s 10-year yield advanced three basis points to 4.38%
Commodities
West Texas Intermediate crude fell 1.7% to $80.54 a barrel
Spot gold rose 0.1% to $2,289.26 an ounce
Title
Lightning Strikes At Coinbase
Yesterday, Coinbase announced its collaboration with the notable Bitcoin Lightning company, Lightspark, to integrate the Lightning Network into its platform. This integration will provide Coinbase users with the ability to conduct instant, low-cost, and secure Bitcoin transactions. Users will now have the choice to utilize either the traditional Bitcoin network or the Lightning Network for their payments, transactions, or transfers.
Prior to this integration, Coinbase users frequently encountered transaction delays ranging from 10 minutes to 2 hours and often faced high fees during periods of network congestion. This new option aims to significantly enhance the efficiency and affordability of transactions on the platform. According to the announcement blog, “With the Lightning Network integration on Coinbase, the cost of sending BTC globally is 20 times less than the average 2% charged on credit card transactions and a fraction of the $30 paid for wire transfers.”
“The Lightning Network, built on top of Bitcoin, enables instant off-chain bitcoin transfers at a fraction of the cost. Since its launch in 2017, the Lightning Network has grown steadily, leading to an increase in demand from our customers. With this integration, Coinbase customers can now instantly send, receive, or pay with bitcoin on Lightning directly from their Coinbase account.”
Hong Kong Hype Falls Short
For Hong Kong standards, the Bitcoin and Ethereum ETF flows were quite impressive. However, the expectations that Hong Kong could surpass the U.S. on its first day were confused and misplaced. The mix-up stemmed from various sources conflating inflows, volume, and day-one seeding.
A spokesperson from the largest ETF issuer, ChinaAMC, stated on CoinDesk, “I am very confident that the initial listing scale of Hong Kong’s virtual asset spot ETF (more than US$125 million) can exceed the issuance scale on the first day of the United States.”
This prediction largely materialized as ChinaAMC attracted $123 million on its debut day, marking one of the most successful launches in the region. However, the total market size is significantly smaller than that of the U.S., with only $12 million traded among the three issuers and Ethereum accounting for about a quarter of that volume.
While these figures may seem modest on an absolute scale, they are quite substantial relative to the market size in Hong Kong. Accurate figures are somewhat challenging to obtain due to the novelty of the data, but a clearer picture of how ETH stands in relation to BTC, and how Hong Kong compares to the U.S. will emerge after a few weeks.
It’s important to remember that the U.S. ETF market is around $7 trillion, whereas the Hong Kong ETF market is just $50 billion. These markets operate on vastly different scales.
The Other Flippenings
Two significant flippenings are happening, both involving BlackRock.
The first concerns BlackRock's tokenized asset fund, BUIDL, which has now officially surpassed its rival, Franklin Templeton's BENJI, with assets totaling $375 million compared to $368 million. BUIDL experienced substantial growth last week, increasing by $70 million and now representing 28.9% of the tokenized government security market. A report from CoinDesk clarifies, “The change in guard was largely thanks to the growth of Ondo Finance (ONDO), whose tokenized Treasury offering OUSG leverages BlackRock's token as a reserve asset and enjoyed $50 million of inflows in a week.” This means Ondo’s OUSG, another tokenized government security, contributed significantly to BUIDL’s assets.
The second flippening involves IBIT and GBTC, where the gap in assets under management (AUM) is closing towards a $1 billion difference, a substantial reduction from the $27 billion gap observed in January. Presently, IBIT holds 274,462 BTC, while GBTC has 296,724 BTC. The narrative that Grayscale has been suppressing the market is weakening and will likely become irrelevant. As the bear market approaches, it will be interesting to observe the extent of outflows from these products. For now, it's difficult to assess the investment timelines of the holders, but it's clear that the competition between these two issuers is intense.
Rapid Fire News
It’s rapid-fire news time because there is a lot going on.
Changpeng Zhao, who pleaded guilty to money laundering, will serve 4 months in prison. Making history for the world’s richest man to ever go to prison.
Roger Ver, an early investor in Bitcoin, notoriously known for Bitcoin Cash, has been charged with mail fraud, tax evasion and filing false tax returns. The United States is seeking Ver’s extradition to stand trial in the United States.
Chairman Patrick McHenry of the U.S. House Committee on Financial Services Republicans released the following memo along with announcing a Capital Markets Subcommittee hearing entitled "SEC Enforcement: Balancing Deterrence with Due Process." Gary Gensler is going to get cooked on May 7.
The Fear & Greed Index seems to be broken. I'm sure it's just catching up, but based on what I'm hearing and seeing, I think we should be below 50 right now.
Bitcoin Is Falling | Crash Or Correction?
I am joined by Tom Dunleavy, Venture and Angel Investor, and Partner at MV Capital, to uncover what's going on with Bitcoin and crypto. My friends from The Arch Public, Andrew Parish, and Tillman Holloway, are joining in the second part of the stream to provide an update on the $10K algorithmic portfolio (hint: it's been doing really well!).
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The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.
Excellent as usual. Level headed insights. Well done and thank you!