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If you are a stock market enthusiast, you must have come across the saying, “Sell in May and Go Away", which means that stock markets tend to underperform during the month of May. But does this adage hold true when it comes to the crypto market?

‘Sell in May’ is said to have originated centuries ago in England, but it seems to be losing its relevance in the modern stock market.

Data shows that in the last 10 years, the broader S&P 500 index in the US has delivered negative returns only on two occasions. The same is true for India’s BSE Sensex, which was down in May during 2020 and 2012.

Last year, Sensex rose 6.47%, while S&P 500 saw a mild uptick of 0.55% during May.

Source: Investing.com
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Source: Investing.com

Coming to the nascent crypto market, bitcoin, which is the biggest digital asset, slumped more than 35% in May 2021. However, the slide came on the back of a massive two-year rally, where bitcoin climbed to its all-time high of $69,044.77.

The crypto market turned sour on the back of China crypto ban, risk-off sentiment, rising inflation and fears of US Federal Reserve rate hikes. Currently, bitcoin is trading around the $39,000 level.

In the last 10 years, bitcoin has seen four negative months of May, but experts say that the asset is driven by its own set of technical and fundamental factors.

Analysis of the data showed that May is the third-best months in terms of returns for bitcoin after November and April. September is the only month with negative returns in the past 10 years.

“If we follow the historical performance, then bitcoin and other top cryptocurrencies have performed quite well in May. So we can invalid the saying “Sell in May" in this case. Also, the price movement in the crypto market depends on the market cycles and sentiment," said Hitesh Malviya, founder, IBC Capital.

Data shows that bitcoin despite higher number of bad months of May, bitcoin has easily beaten returns delivered by other asset classes in recent years.

For example, Sensex’s best showing during May was in 2014 at 8.03%, while S&P 500’s was in at 2.16%.

However, investors should keep in mind that despite handsome returns delivered by bitcoin, drawdowns in this asset could be equally severe. For example, the maximum drop in bitcoin during the last 10 years was 35%, however, it was -6.35% and -6.58% in the case of Sensex and S&P 500, respectively.

Further, over the past one year, bitcoin has hit a rough patch and is trading more than 40% lower compared to its all-time highs. Additionally, experts fear that this underperformance is expected to continue.

“Technically, bitcoin has closed below 21-monthly average on the monthly time frame, which is bearish. We might expect a retest of $20,000 level in the next couple of months if market conditions remain bearish due to global economic crisis," said Malviya.

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