Halloween is famous for its spooky traditions and superstitions – there is even one of those for traders! Prepare yourself for the scary story about the ‘Halloween effect’ and what it does with the Crypto Universe.
What is the Halloween effect?
‘Halloween effect’ is a common theory or even a superstition in the financial world. It assumes that from November till April the cryptocurrencies and other markets are on their highest scores. It also is known as a Halloween strategy or an indicator.
‘Sell in May and go away’
It’s a popular saying between traders. The meaning is clear, but why should we sell in May? This strategy is also based on the theory that the main growth of assets is happening from November to April, and in the summer months the market freezes. According to this saying you should sell your assets in early May, take a pause and then return to the markets in November when it’s time for the Halloween effect.
Why is the Halloween effect happening?
Short answer is: ‘no one knows for sure’. This superstition appeared long before Bitcoin and there were countless attempts to explain this phenomenon but they are all based on assumptions and not facts.
Many traders think that the reason is trivial – everyone likes a good-old summer vacation without having to worry about work or, let's say, some market indexes. So this unwillingness to take risks during the summer period causes such a big difference in financial markets and affects liquidity of assets.
Some believe that it originates in the UK in the 1900s – investors were used to visiting their mansions in the summer and getting some rest from Londons’ nervous work-life. Of course, they didn’t do anything with their portfolios while taking sun baths or swimming in the pool and sipping Margaritas. Soon other traders from all over the world decided to do the same thing. And since no one is doing anything on the markets there is no income during this period.
It’s hard to prove that all this is true. Does really increased participation mean increased gains? Very unlikely. Plus, if we’re being completely honest – nowadays it’s so easy to do crypto trading, you just have to have access to your smartphone and an internet connection. It’s highly doubtful that vacations can completely stop traders from making their moves in the financial world.
So many men, so many minds. There are a lot of opinions on why the Halloween effect exists, but none of them is a bulletproof theory. Let’s just say that it’s a mystery in honor of the holiday spirit it was named after.
Is the Halloween effect a real deal?
Does this effect actually exist or is it just a superstition? How does it affect BTC? Let’s take a look at Bitcoin price statistics.
- 2015
In 2015, the bears came and left the market, which attracted bull investors looking to invest more in the new asset class. This led to a 41% increase in Bitcoin in the winter period.
- 2016
From October to May bull runs brought BTC investors 120%. However, after May, the growth of the asset continued.
- 2017
At the winter period Bitcoin managed to reach $20,000 and afterwards corrected to $5,800. On May 1 of 2018 BTC price was 52% higher than it was on Halloween 2017.
- 2018
The period from October to May was unfortunate – the price of BTC decreased by 13%. The Halloween effect didn’t work.
- 2019
By December of 2019 BTC price was about $7,200. Later, in May it turned $9,600. So this time the effect has worked again.
- 2020
In December 2020, BTC had raised over 300% since January. That year ended at a price of about $29,374 – the highest it had ever been.
- 2021
Bitcoin hit an all-time high, $68,000, in November, but by January 2022 it fell down below $35,000. In May the price was $31.700.
As we can see from BTC price stats, most of the time the theory about the Halloween effect was correct and BTC has increased by half on average from the end of November to May. However, there are some exceptions.
Conclusion
Is it a trick or is it a treat? Everyone should decide for themselves. The Halloween effect isn’t a strict rule, however as history has shown there is some kind of a pattern. And we all know that Bitcoin is one of the most volatile currencies out there, so we should forget about any kind of stability with it, even if it is a Halloween effect – sometimes it works, sometimes it doesn’t.
SimpleSwap is wishing you to have a fun and spooky Halloween! Did you like our spooky story? We have more of those in our blog. In our Twitter we have a big Halloween giveaway – join us there!
Don’t forget, the easiest way to buy or exchange coins is to use SimpleSwap services.
SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.
