Even Crypto is scared: get to know the Halloween effect

The scariest holiday of the year is upon us, which usually means you need to start preparing your costumes, decorating your house and, of course, make sure you have enough candy to distribute to young trick-or-treaters. However, if you’re into investing during the scariest time of the year, you’d better be prepared, because the Halloween effect might affect your portfolio. Not familiar with that term? Don’t be scared. We’re here to tell you all about it.

What is the Halloween effect?

The Halloween effect is a popular superstition among traders who believe that cryptocurrencies and other assets such as stocks, perform better from the end of October (when Halloween occurs), until the end of May. This unusual belief is also known as ‘the Halloween strategy’ and ‘the Halloween indicator.’

What is the cause of the Halloween effect?

As if this phenomenon wasn’t spooky enough, no one knows how or why this strange anomaly started, but it is believed to have been in existence for more than a hundred years. Which means it first took place way before Bitcoin, Ethereum, or any other digital coin was born. It was probably even before the word ‘digital’ existed. 

Many assume the sudden rise in prices during this time of year originated in the United Kingdom around the 1900’s, at a time when well-established families left the big city for vacations in the summer and early autumn. They were believed to have ignored their investments until they returned in September and then reopened their positions. A strategy that is also famously known as “sell in May and go away.”
However, nowadays, with platforms like eToro making it possible for people to trade from anywhere in the world on a daily basis, it is safe to say this assumption doesn’t stick..

Furthermore, there seem to be a number of theories circling around that speculate where the Halloween effect began and what started this fascinating and odd strategy. But the more you look into it, the more you understand that there isn’t one conclusive answer. Leaving it as an unsolved mystery.

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Does the Halloween effect impact crypto?

It took some time for the Halloween effect to make an impact on the popular digital coins market. But, in 2015, something happened. The bear market came to an end on October 31st, and from that day until the end of May, the cryptocurrency market increased its value by 41%. But that was just the beginning.

Almost exactly a year later, between October 31st, 2016 to May 1st, 2017, Bitcoin started to make waves as it gave its investors a massive return of 117%. And it didn’t end there. On October 31st, 2017, the crypto market went completely berserk when Bitcoin skyrocketed and reached an all-time high of a whopping $20,000 per share and subsequently, retraced back to $5,800. Even so, on May 1st, 2018, Bitcoin increased more than 52% from the previous Halloween. 

But the world’s most popular digital coin wasn’t the only one which registered massive gains. Between the months of October and May of this year, the Chinese cryptocurrency Cardano registered a maximum peak of a 291% gain, while Ethereum, Bitcoin’s sworn enemy, registered gains of 206%. Pretty impressive.

However, don’t get your hopes up just yet. It is important to note that past performances are not an indication of future results. As you probably know, COVID-19 left a mark on the market, and some cryptocurrencies such as Bitcoin did not show the same results this year as they did the year before. Making it harder to determine if the Halloween effect will come back to haunt us.

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Past performance is not a reliable indicator of future results

So is it a trick or a treat?

There is definitely some truth to the Halloween effect and its impact on the markets. History has shown us that. But history also shows that in recent years, it has not been as consistent as people may think. Let’s not forget, we are talking about the world’s most volatile currency. With the US election right around the corner, and a COVID-19 vaccine hopefully being formulated in a lab as we speak, who knows what the rest of 2020 will bring the market’s digital coins? Now that’s really scary.

Invest In Crypto

This ad promotes crypto investing, which is highly volatile and unregulated.

Trading Crypto Assets with leverage is regulated and comes with a high risk of losing money. Buying Crypto Assets is unregulated in most EU countries and therefore is not supervised by EU regulatory framework and carries no EU protections.

Your capital is at risk.

Even Crypto is scared: get to know the Halloween effect from eToro.

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