Did you ever hear of the theory called ‘The Halloween Effect’? This theory believes that various stocks and other financial instruments like Bitcoin begin to perform their best from 31st of October throughout May. This performance continues through half of the year. Does the price of Bitcoin actually benefit due to Halloween or is it nothing but a spooky superstition that takes rounds during this time of the year?
The Halloween effect – What is it?
Traders and investors use several tools like fundamental and technical analysis to evaluate the weakness or strength of any financial asset before you place a buy order. There are certain analysts who utilize more relevant methods like cycles, dates, math and sometimes even astrology. During this holiday season, there is also one more common theory that every year, during the beginning of November, assets will perform in a better way and offer you increased returns when you invest throughout the year.
This theory called the Halloween Effect suggests that purchasing an asset and holding it throughout the winter season will give enough rewards to the investor. The investor or trader is later on encouraged to sell off the assets in the month of May which is considered as the other half of the marketing strategy based on timing.
Is this true with the Bitcoin market?
Now the question is whether this holds true with the Bitcoin market. Bitcoin price gains on average nearly by 50% per Halloween throughout the timeframe of May. When the bear market came to end for Bitcoin in the year 2016, 31st October throughout May provided a kickstart to the crypto investors, emerging assets more than 42% increase.
In between 31st October and 1st May 2018, Bitcoin had set its all-time high of $20,000 and again traced down to $5800, yet on 1st May, 2019, Bitcoin had increased to more than 55% from the last Halloween. Selling in the month of May and going away would have worked perfectly in such a case and Bitcoin would have entered a deep bear market post this.
From October 2018 throughout May 2019, this was the sole decline following Halloween thereby leading to a -12.5% fall in value. If you consider this Halloween, Bitcoin is trading at the average same price that it was trading on 1st of May, 2018. This specific cryptocurrency is presently priced at $9300 per BTC, following the third-largest one-day gain in the history of the asset. So, now that the investors are gearing up, are they preparing for this Halloween effect? Well, that’s quite possible as Bitcoin rose by around 50% in every year that it was analyzed. As the halving of Bitcoin is all set to occur in May 2020, there is the highest potential for increase in value.
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