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The crypto sector has a lot of facts, strategies, and updates that not everyone is aware of. We aim to bring you information about everything that can prove to be beneficial for you in the long term if you are thinking of being a part of the crypto industry. Since Halloween is just around the corner, we thought to bring you information on the Halloween strategy or Halloween effect that exists in the cryptocurrency domain. If you understand this strategy better then you might include this in your digital currency trading activities. Therefore, read the article carefully and get a grip on this concept.
What Is The Halloween Strategy?
The Halloween strategy, Halloween indicator, or Halloween effect is referred to as the market timing trading strategy that is based on the hypothesis that crypto and stocks perform better during and after Halloween. The date ranges from October 31 to May 1 every year. The Halloween effect mentions that people should purchase digital currencies in the month of November and hold them (very cautiously) all the way till mid-April and sell them for profit. Thereafter, the investor needs to use those proceeds to invest in other cryptocurrencies.
However, there is no guarantee that your funds will increase. This is due to the fact that the recent crypto meltdown is wiping off a significant amount of value from the market. In addition, last year, though the market initially took off in November, it indeed was hit by multiple crypto crash sessions that led to a market bloodbath. This strategy is the most used in the U.S. stock market and is much more efficient in that domain as it is not as volatile as the cryptocurrency market.
Why The Halloween Effect Came Into Existence?
This ghostly phenomenon has been existing for over a hundred years. Therefore, it originated way before Bitcoin (BTC), Ethereum (ETH), or any other virtual currency was even developed. This creepy trading strategy has causes that are still unknown. However, it does have some stories and historical references where we see that a thing like the Halloween strategy in trading exists.
It is assumed that such a strategy came into practice in the 1900s. At that time wealthy families used to leave for vacations in the months of summer and the onset of autumn. Therefore, they used to restrict their investment activities at that point in time when they were enjoying holidays. They were then believed to come back in September and move forward with their investment positions. This effect or trading strategy was also called “sell in May and go away.”
Currently, there are various trading platforms available for both stocks and crypto that let people make investments from almost any part of the world. So, such an assumption does not exist today, which might affect the usage of this trading strategy. Further, there have been other delusional stories about the Halloween strategy being into effect. However, none of them have a valid proof to date. But yes, there have been instances in the crypto market, where this strategy did affect it in a positive manner. These instances have been discussed in detail in the section below.
How Does The Halloween Strategy Affect The Crypto Market? H2
The Halloween effect didn’t have an impact on digital currencies right from the time they were developed. It did take a considerable amount of time for this trading strategy to be implemented in the crypto market. Since, this is the most volatile financial market ever, the way this effect could not affect it the way it works with the stock market. The first such instance where Halloween strategy for crypto was noted was in 2015, when BTC, the first and largest cryptocurrency turned six!
Prior to that point in time, the market was completely bearish, and a bullish rally was expected, which wasn’t happening. However, from October 31, 2015, till May 1 next year, the digital currency domain grew by over 41%. This was definitely huge considering the infancy of this sector. Also, this increase was literally the start of all that was going to come. In addition, the Bitcoin price increased by over 45% from a value of $311.88 to $452.39. Further, on November 4, 2015, it spiked to a price of $482.01, rightly supporting the Halloween indicator.
About a year later, between the same dates in the years 2016 and 2017, Bitcoin started gaining considerable popularity as the crypto provided massive returns to its investors around the world. In that period, it surged by about 117%, which was more than double of the year before that. The price gains did not cease here as currency skyrocketed after October 31, 2018, and reached an all-time high of $20,000. However, it did drop immensely as well and eventually resorted to a price of $5,800. But the thing to be noted here is that the BTC price still rose by 52% compared to Halloween in 2017.
The world’s most valued currency wasn’t the only one that was positively affected due to the effects of the Halloween strategy in crypto in that period. Even prominent crypto investment options like Ethereum (ETH), the second-largest digital currency and the biggest competitor of BTC, along with Cardano (ADA) increased massively from October 31, 2019, till May 1, 2020. The ADA token rose by a huge 291% between that time period and the ETH crypto also hiked by about 206%.
So, all these ‘green’ gains might have made you happy, wouldn’t it? Aren’t you literally impressed by it? But we suggest that you should hold your horses! The past performances might have been amazing but the fact that the current situations have not been that great can never be denied. Last year in November, the market boomed and BTC even reached an all-time high of over $69,000. However, the currency and the entire market later slumped in early December that year after the crypto crash session then and due to various reasons, kept on plunging till the time of writing this article.
Due to the Russian invasion of Ukraine, investors around the globe dumped their risky possessions which affected the market even during the time of Halloween effect. Not only that, BTC even lost a value of more than 73% as it dropped down to $18,000. At press time as well, the crypto was trading in a price bracket close to $19,000. Therefore, it is right to say that the Halloween strategy could not do much justice to the domain due to the crypto winter and other underlying reasons.
So, we can say that though this market timing strategy might have been beneficial at one point in time, it is not so in the current situation. But yes, things might get better. The Halloween indicator might prove beneficial for the domain if the negative developments in the sector come to an end. This can be said due to the fact that though the domain is suffering, it does try to rebound every single time.
Halloween Effect: Trick Or Treat?
We think that the Halloween strategy in crypto can be both a trick and a treat depending on the market conditions of course. However, the fact that it indeed has an impact on the crypto market has been proven through historical performances. In 2020, however, the market did not do well due to the advent of the Covid-19 pandemic. This bearish trend was carried forward in the last 1.5 years as well. Moreover, the global unrest due to Russia also fueled the crypto meltdown.
This is why it won’t be fair to say that the Halloween strategy for crypto is a trick since it might look so now but situations are expected to change in the future, which might be for the better. It is expected that the market might recover from the situation it is facing right now. Market analysts have predicted that Bitcoin might even go up to $100,000 in the coming years, which seems distant currently. But let’s wait for further updates on the matter before reaching a conclusion straight away!
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