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Crypto hitting 2-month lows. Is it “Sell in May and go away”?

FOMC, Macro Outlook, and BTC Halving Cycles

Hello Investors,

Bitcoin and Ethereum have tumbled to their lowest levels since late February.

All three major indexes broke five-month winning streaks with Dow Jones hitting its worst month since September 2022.

All during the “sell in May and go away” season.

So is it time to buy or sell?

Crypto hitting 2-month lows. Is it “Sell in May and go away”?

The Wall Street maxim, popularized by The Stock Trader’s Almanac, suggests investors should sell their equity holdings in May, and re-enter the market in November.

This is based on the historical tendency of stocks to underperform between May and October compared with the November to April period.

Some investors might be tempted to gut their holdings after a bruising April - especially crypto investors.

BTC lost 8% in the last 7 days, sliding below $57,000 yesterday, while ETH lost ‘only’ 5%, touching $2,850 levels.

The Dow Jones Industrial Average index fell 5% in April, the S&P 500 declined 4.2%, and the Nasdaq Composite declined 4.4%.

The main drivers? Fears of stagflation driven by weaker GDP growth and hotter-than-expected inflation data.

Also, the bearish move follows the launch of Bitcoin and Ethereum ETFs in Hong Kong, with the six funds hosting just $11 million in volume on their opening day of trade.

On the bright side, during yesterday’s FOMC meeting, the Federal Reserve Chair Jerome Powell said that policymakers were unlikely to hike rates again.

Also, the economy has stayed robust, despite one softer-than-expected GDP reading.

Consumers continue to spend, the labor market remains solid and companies have reported solid earnings growth.

Lastly, while stocks usually see more volatility closer to election day in November, stocks have historically rallied during the summer in presidential election years.

Timing the market is difficult, more impossible.

There are periods when the market is down, and these are usually the best times to buy.

Then there are periods of high growth, as we’ve seen in March, during which we consider selling.

But in the end, the question really is - can we outperform the S&P 500? By how much? At what risk?

I’m confident my crypto positions will outperform the S&P 500 by far.

To me, the upside is higher, and on positions like BTC, ETH, or SOL the risk isn’t much higher than stocks.

They will all do 2x from today's levels, it’s a question of when.

But the ‘when’ is still sooner than the time for the S&P 500 to do 2x.

Meaning?

I don’t think it’s time to sell now, quite the opposite.

I’m buying the dip as I do for a year and a half now.

Regarding the crypto cycle.

When we look at the last 2 halvings, we shouldn’t be surprised by a decline.

After the 2nd halving, it took BTC 16 weeks to get back to the halving levels and start the rally.

The 3rd halving was shorter, it took only 10 weeks to break the levels.

And 21 weeks to start the crazy rally that brought us a +550% increase over 1 year period after the halving.

Taking a similar approach this year, we might expect the BTC to start rising again somewhere in the summer of 2024, but fully rallying closer to the end of 2024.

And we still have the macro cycle that should bring immense liquidity into the risky assets at the end of 2024.

Considering altcoins is a different story though.

They are much more risk-sensitive - we have seen it even on BTC:ETH pair.

And here we must be cautious - many altcoins won’t survive to see the next bull market.

As much as promising they look, this is the truth and you can check the last bull market coins to compare.

To sum it up, rather than trying to predict the short-term moves, I would increase the time horizon and think of the market in terms of the next 12-18 months.

And while doing that, keeping the risk:reward in balance with my expectations, avoiding every meme coin and speculation, and rather sticking to a solid DCA strategy into blue chip crypto projects.

  • LayerZero snapshot today

  • EigenLayer to airdrop 5% of the allocation to stakers, claimable on May 10

  • Renzo protocol airdrop, claimable April 30

  • Drift Protocol airdrop likely in May

  • Swell L2 launch and points airdrop

  • Stargate V2 introducing txn batching and dynamic credit allocation

  • Changpeng Zhao "CZ" sentenced to 4 months in US federal prison.

  • Tether $USDT releases Q1 2024 attestation showing $4.52B profit.

  • A16z purchased ~$90M of Optimism $OP tokens in early March.

  • Mode extends Airdrop 1 until May 5th.

  • Securitize has closed a $47 million funding round led by the world's largest asset manager, BlackRock

  • Jito, a Solana-based DEX aggregator, is building a restaking service

What’s your big highlight of this week?

All the best,

Matt.

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