Halloween effect and 5 spooky (but true!) crypto stories 👻
Halloween is upon us — the perfect time to tell bone-chilling tales in the dark. However you feel about this pastime, one thing we know for sure is that the scariest stories are those that are true. Today, we look at horrors that shook the crypto world, from shrinking savings to scary extortions to vanishing NFTs.
These living nightmares pull at the threads of users’ sanity. Eyewitness accounts make them all the more eerie — but first, have you heard that Halloween 🎃 can spook the crypto market into changing direction?
🦇 Halloween effect
The Halloween effect, or strategy, is a hypothesis borrowed from stocks, an empirical anomaly, and a mystery. It suggests that equities perform better between October 31 (Halloween) and May 1 than from early May through late October.
This strategy prescribes buying stocks in November to sell in April and investing in other asset classes the rest of the year. Some believers refrain any from investment in the summer.
Historical stock returns appear to confirm that premise — through the past half-century, capital gains from November through April have been superior. Those who sell in May beat the market over 80% of the time over five years and 90% over a decade. A comparison of the S&P 500 returns in 1970–2017 and 1991–2017 attests to this.
Why does this happen?
Speculations abound, but nothing is conclusive. Summer vacations, for example, do not appear to be the cause. First, market crashes prove that higher participation does not always align with higher gains. Secondly, trading now happens electronically, 24/7, from any corner of the world.
What about crypto?
So, is the same mystery observed in crypto? After all, the market is very young and volatile compared to TradFi, despite some correlation with stock prices.
Let’s compare profitability for bitcoins bought on November 1 and sold on May 1 over the past decade. As you can see, the period was profitable six times out of ten:
Bitcoin also gained ground between November 2022 and May 2023. The price change was significant — around +$8.8K, or over +43%.
So, is the Halloween effect a myth?
Generally, relying on any one strategy is counterproductive, and past performance never guarantees future results. Cryptocurrencies also lack the stability this anomaly requires. They are susceptible to numerous factors, internal and external, from the health of businesses to the Fed’s interest rate.
🕯 5 tales from the crypt
While the Halloween effect may be a myth, the following stories happened in real life — and they can scare your socks off! 🧦
1. Locked out 🔒
Being trapped in a creepy room is a horror movie cliche. Crypto investors go through a similar spectrum of emotions when they get locked out of their wallets. Fortunes have been blocked this way, due to sheer forgetfulness.
In 2021, The New York Times retold some bone-chilling experiences of would-be millionaires. Here is one story of desperation that spans over a decade.
Stefan Thomas, a German-born programmer living in the US, received 7,002 bitcoins in 2011 for making a Bitcoin explainer video. Since then, the BTC price has soared from less than a dollar to $38,000 — making those holdings worth over $266 million.
The coins remain on an IronKey hard drive, and the owner has two password guesses left before the contents are encrypted forever. As a FIPS-140–2 Level 3 certified device, IronKey is tamper-resistant and secure enough for use by the military and intelligence. Even its development was partially funded by the United States Department of Homeland Security.
According to Wired, the funds are locked to this day, although Stefan has sought the help of crypto- and hardware-hacking groups.
2. Address switchers 👻
Beware of insidious malware! You may think you are withdrawing crypto to your own address, but it will land in someone else’s wallet. Sneaky address switchers work in the background, replacing any crypto addresses you copy.
This threat is real, and every PC is at risk — Reddit has plenty of chilling stories to prove it. Even worse, the changes may not be visible at all, and even hardware wallets are vulnerable!
Suppose you want to send 1 BTC to an exchange. You copy the deposit address from the platform and enter it into the address field. Be sure to double-check those details — the infection may come from suspicious sites, links, software, and browser extensions.
3. Crypto ransom 🔪
The advent of crypto was a boon and game changer for cybercriminals. These bandits delight in the macabre. They are like ghouls — evil beings that steal bodies from their graves and lure victims into dark corners to consume their flesh.
A recent Reddit post describes a horrifying ransomware attack on a financial business. An employee opened an infected attachment from an affiliated company, releasing the evil upon the entire network.
Due to the need to shut down all connections to all locations, block IPs, and rebuild all virtual machines, it went completely black for three days. The staff slept two to three hours a night and returned to work, rebuilding the security systems under constant pressure. However, in retrospect, there was an upside:
According to Chainalysis, this type of crypto attacks rose in the first half of 2023. The volume of ransom payments made approached the second-biggest annual total on record.
4. Vanishing NFTs 😱
Despite the reported market decline, some NFTs are still worth millions. Buyers acquire permanent rights to coveted digital assets, but what if those assets disappear? How would you feel if artwork worth a fortune suddenly left your wallet?
Holders of digital art have complained about their collections missing. The problem is that most NFTs, unlike crypto, do not permanently exist on a blockchain. They are merely smart contracts, lines of code pointing to pieces of media — NFT artworks — stored elsewhere.
Those contracts can exist without that data. What if the asset is on a centralized provider that shuts down? What if your NFT links to a URL that can be changed at any time?
Sometimes, display issues are to blame. Either way, NFTs continue disappearing. They also bring other nightmares, such as stealing funds via tempting air-drops.
5. Flash shrink 💥
Flash crashes are always creepy, but the one on September 7, 2021 is the scariest to date. In just 45 minutes, the BTC price shed around $5,000, dragging the rest of the market into the abyss. A whopping $400 billion left digital assets within 24 hours, with almost 375,000 leveraged positions liquidated.
Ironically, that day marked a milestone in crypto adoption, as El Salvador officially made Bitcoin legal tender. Yet a glitch in the government-backed wallet app triggered a panic sell-off. HODLers watched in horror as their savings shrank — or vanished in the blink of an eye.
In a domino effect, anything related to crypto was hit hard. Crypto stocks tanked, while users of Kraken and Coinbase were frustrated by transaction delays and cancellations. The Gemini exchange had to enter a full-maintenance period to restore performance.
💡 Lessons learned
While flash crashes are beyond users’ control, other nightmares prove that we must take responsibility for the safety of our data, holdings, and collections. You cannot afford to be careless online: verify transaction details, scan your hardware for viruses, and ramp up your defense with EarnBIT! Follow our wallet security tips and learn to detect red flags in ICOs and other crypto offerings.
