Crypto Thanksgiving effect: Myth or reality?
Have you mapped out your shopping plans? Thanksgiving, Black Friday, and Cyber Monday are around the corner. The five-day frenzy is a boon to retailers, but risk asset performance is generally mixed. Here are the key facts to know when trading crypto.
Retail, stocks, and crypto
Thanksgiving Thursday — the fourth Thursday in November — kicks off a 5-day shopping spree in the US. Retailers earn a lion’s share of their annual profit on Black Friday, which extends into Cyber Monday — when consumers buy online as they return to work.
Black Friday seemingly alludes to the state of the companies’ balance sheets. From the week before it to the week after, the retail industry flourishes.
The 5-day sales figures help investors assess consumer sentiment and the retail sector health. High Black Friday spending heralds a profitable shopping season, so retailers’ stock may rise. If consumers curb their spending due to recession fears, the prices may dip.
That said, those figures are not the sole market driver — earnings reports and world events also come into play in the final weeks of the year.
Stocks generally underperform retail. For crypto, there is no direct connection — unlike shares, tokens are priced based on market value, not the issuers’ earnings.
Stock market effects: volumes and gains
The US stock market is closed on Thanksgiving and works shorter hours on Black Friday. As millions of Americans take time off and the spending surges, trading volumes tend to drop.
Market activity generally rises the day before a holiday. This so-called holiday effect corresponds to higher returns, but the uptick for stocks is slight as consumers spend billions elsewhere.
In 2022, Americans spent $35.3B over the 5-day holiday period — more than in 2021 ($33.9B) and 2020 ($34.4B). The most active spending happens on Cyber Monday — almost a third of the total.
S&P 500 Thanksgiving performance
- Forbes Advisor has found that the S&P 500 returned just +0.6% on average between the Monday and Wednesday before Thanksgiving from 2018 to 2022.
- The index has generally shown mixed Thanksgiving performance over the past two decades, with gains only half the time. Just three Black Fridays (2001, 2007, and 2012) brought over +1%, with one (2009) resulting in a -1.7% loss.
Volume dynamics
The volume decline reaches 20% for stocks, according to Russell Investments, and the gains before Thanksgiving are usually modest. On Black Friday, the half-day for stock exchanges, volumes drop by as much as 55%.
Cyber Monday typically brings higher-than-usual volumes, but performance is still unimpressive, with a roughly 0.06% decline on average. Subsequently, the activity usually grows by mid-December.
So, what about crypto?
Historically, the crypto market has barely been affected by Thanksgiving and Black Friday. Although volumes may drop as traders’ focus shifts to the bargain hunt, the effect is usually minor.
Bitcoin performance on Thanksgiving 2022
Last fall, the crypto market struggled following the FTX collapse and the Terra contagion. The meltdown of Three Arrows Capital had also rippled through the market, causing businesses to go under in a domino effect.
The downfall of Sam Bankman Fried’s empire shook consumer and investor trust, as it had been seen as a pillar of strength for crypto. Questions about existential threats from new regulations also arose.
Here is what happened in 2022 during what Barron’s labeled “the gloomiest Thanksgiving ever” for BTC and ETH.
- Throughout November, Bitcoin was worth roughly $17,600 on average, losing 16.2% in total.
- At the start of the month, BTC rose above $21,000.
- Two days before Thanksgiving, the BTC price hit a low of $15,782.30.
- On Thanksgiving, it climbed only slightly from $16,611.64 to $16,771.48.
- Through Thanksgiving, BTC traded at -65% YTD and -20% MTD, slightly ahead of ETH (-69% and -26%, respectively).
- Price-wise, it was the worst Thanksgiving for BTC and ETH since 2018.
The BTC price also slipped around the previous Thanksgiving days. It retraced by 17% in 2020, 10% in 2021, and 5% in 2022.
Thanksgiving 2023: Bitcoin in context
Since 2022, investors’ interest has grown on the news around spot Bitcoin ETFs. While the SEC’s expected approval may catapult the price, some experts doubt an influx of new capital will follow.
BTC started this Thanksgiving week by reaching $37,000, keeping close to the 18-month highs. The macro landscape suggests short-term volatility, but the network fundamentals are as “rosy” as they have ever been in 2023, according to Cointelegraph. There are hopes that “a classic crypto bull market is once again in its early innings.”
Based on robust supply dynamics, long-term holders are unwilling to sell. On November 20, 2023, bitcoins dormant for at least a year comprised over 70% of the supply. Thus, traders hoping to “buy the dip” may be disappointed. Some experts predict range-bound moves in the short term.
Bitcoin’s 30-day correlation with world stocks has also declined. According to Bloomberg, on November 15, 2023, it sat at -0.23 — the most negative value since the start of the COVID-19 pandemic in 2020.
Black Friday crypto deals: Pros and Cons
Crypto exchanges capitalize on the holiday cheer through special deals for new and existing users. Ranging from sign-up bonuses to slashed trading fees, they may simplify market entry or boost returns. However, even genuine offers have potential downsides.
- Generous bonuses tempt users to overspend, increasing the risk of poor planning and emotional trading.
- The time constraints of short-lived deals may trigger impulsive and irrational behavior, undermining long-term investing goals.
- The advertised benefits are not always as significant as they seem. Some — like promises of cheap or free crypto — turn out to be scams.
💡 To make the most of crypto Black Friday, learn about the common mind traps — biases that mess with trading decisions. Read our guide to five typical thinking errors.
One of the strongest biases is FOMO, or the fear of missing out. As bargain deals flood social media, users exaggerate their value, overlooking the fine print.
FOMO is closely related to social proof and herd mentality. Research shows that it is the most prevalent in people aged 18 to 35. This bias prompts investors to make counterintuitive moves — for example, buy a coin at a high or sell at a low, rather than vice versa. Such capital decisions not only cause financial damage. They may affect one’s mental health, relationships, and quality of life overall.
To sum up
The 5-day period from Thanksgiving to Cyber Monday has a minor effect on stocks. As cryptocurrencies have no connection to retailers’ sales figures, there is no direct correlation with consumer spending.
In 2023, Thanksgiving falls on November 23. Although Bitcoin was in the red during the 2020, 2021, and 2022 Thanksgiving, this year’s fundamentals do not suggest a decline. Traders should assess the broader context, including macro and network factors, and avoid impulsive decisions driven by Black Friday deals.
