"Sell in May and Walk Away." This age-old Wall Street adage, in addition to the stock market, has proven increasingly applicable to cryptocurrencies as well.
From June to August, market growth and trading volumes have historically trended down across the sector.
Last year, total volumes on spot and derivatives exchanges during the summer months dropped 18% compared to the spring. Conversely, volumes rose nearly 10% in the subsequent fall, according to digital asset data provider CCData.
Moreover, the total market cap shrank 4% during this phase last year, only to rise by a whopping 52% in the next four months, a striking contrast.
Benzinga spoke to experts to demystify the "summer doldrums" as many in the market label them.
Summers: The Not-So-Exciting Time For Cryptocurrencies
Ryan Grace, Head of decentralized trading platform tastycrypto, said that most retail traders and institutions cut back on trading activities due to the holiday season.
Indeed, summer is the peak travel time in the U.S., and people are seen indulging in water activities and chilling at the beach.
"This often creates an environment of lower volatility," Grace remarked. He added that selling options could be a good strategy in a neutral market, but reminded that a low liquidity market can witness wild swings quickly.
Markus Kraus, Affiliate Manager Europe at Trive Financial Services, while referring to the aforementioned factor, also attributed the dull phase to a lack of significant events like cryptocurrency conferences and meetings with regulators that could move the markets.
Chris Kline, COO & Co-Founder at BitcoinIRA, mentioned that the phase tends to witness a spike in Bitcoin BTC/USD accumulation due to the subdued prices, offering a great chance for bullish traders to grab the asset before a potential rate cut by the Federal Reserve later in the year.
What To Expect During The Fall And Winter Months?
Grace deemed the fall as "one of the best times" to trade cryptocurrencies due to the injection of fresh liquidity by investors returning from vacations.
"Historical data shows considerable price movement in Bitcoin during the fall when compared to the summer, though the direction varies. This trend often continues into the winter months, driven by renewed market sentiment and year-end positioning," Grace emphasized.
Echoing this sentiment, Kline predicted a return of bullish impulse in the latter phase of the year.
With prediction markets anticipating a 70% chance of two or more rate cuts by year-end, premised on easing inflation and upcoming elections, Kline was hopeful that cryptocurrencies, along with other major assets, would see a northward movement during the fall and winter months.
As of this writing, the total cryptocurrency market cap was worth $2.39 trillion, while Bitcoin was exchanging hands at $65,556.36, according to data from Benzinga Pro.
Photo by FellowNeko on Shutterstock
These insights set the stage for deeper discussions at the upcoming Benzinga Future of Digital Assets event on Nov. 19.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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