Bitcoin’s $100K Goal Could Be Brief as BTC Traders Prepare for ‘Sell in May’

A recent surge in bitcoin (BTC) has caught traders’ attention, particularly regarding the potential to reach the $100,000 mark shortly. However, this excitement may be fleeting as the historically weaker market trends of May approach.

“In general, the upcoming months tend to be less favorable for the financial markets, prompting many investors to follow the adage of selling in May and stepping back,” expressed Jeff Mei, COO at BTSE, in a message sent via Telegram.

“Despite the markets lagging in recent months, this year might defy past trends, especially with Bitcoin nearing $97K and other growth stocks gaining ground recently. Recent disappointing GDP figures from the US highlight some economic risks, as another quarter of negative growth could signal a recession, but interest rate reductions might also spur recovery,” added Mei.

The saying “Sell in May and go away” has long been a staple in traditional finance.

This phrase implies that investors should divest their assets at the beginning of May and potentially re-enter the market in November, on the assumption that equity markets typically underperform during the summer period due to lower trading activity, decreased involvement from institutional investors, and historical performance metrics.

The expression traces back to the early days of the London Stock Exchange, originally stated as “Sell in May and go away, come back on St. Leger’s Day,” which referred to a horse race taking place in mid-September.

What the data indicates

Traditionally, U.S. stocks tend to show a decline from May through October compared to the stronger performance seen between November and April, leading some investors to adopt this strategy as seasonal wisdom.

Bitcoin also exhibits familiar seasonal trends, often shaped by broader economic cycles, significant institutional investments, and retail market sentiment. Data from CoinGlass indicate that Bitcoin’s performance in May has often been lackluster or negative recently.

In 2021, BTC experienced a 35% drop, marking one of its poorest months that year. May also was unfavorable in 2022, falling 15% due to the collapse of Luna. Conversely, in 2023, Bitcoin remained relatively stable, showing slight positive movement. Notably, BTC rose 11% last May and recorded a 52% increase by the end of May 2019, showcasing an exceptional performance compared to all months after 2018 when the crypto markets were thought to have matured following that year’s altcoin cycle.

Data further suggest that negative May results are often succeeded by additional drops in June, with four of the last five June months finishing in the red.

These trends don’t ensure future results; however, they imply that cryptocurrency markets may increasingly react to macroeconomic and seasonal sentiments similarly to equities, particularly as more institutional money flows into the sector.

A note of caution?

Market participants may adopt a more cautious approach in light of historical price patterns and declining momentum following robust gains in the first quarter. Altcoins—especially meme tokens—could be particularly susceptible to price corrections given their recent hype-driven rallies and speculative trading.

“Since 1950, the S&P 500 has averaged only a 1.8% gain from May to October, with positive returns in around 65% of those six-month spans, which is significantly weaker compared to the robust performance traditionally observed from November to April,” noted Vugar Usi Zade, COO of the crypto exchange Bitget, via Telegram.

Over the past dozen years, Bitcoin’s average second-quarter returns (April through June) have been at 26%, but with a median return of merely 7.5%, highlighting the impact of rare events on performance and the recurring volatility.

In the third quarter (July through September), the average return drops to 6%, with the median showing slight declines, suggesting a trend of fatigue or market consolidation after the second quarter, Zade elaborated with supporting data.

“This overlapping seasonality calls for careful navigation as we enter May. Historically, the fourth quarter has been Bitcoin’s most favorable season, boasting an average return of +85.4% and a median of +52.3%, while the third quarter tends to see more subdued or negative results,” Zade remarked.

In summary, while traditional market patterns may not dictate cryptocurrency movements, investor sentiment still responds to established narratives, and the principle of “Sell in May” could manifest as a self-fulfilling prophecy if technical indicators begin to falter and market sentiment shifts.