A popular Bitcoin trading strategy, which has consistently worked since 2020, has seemingly lost its shine
Buying at the close and selling at the open may no longer be a viable trading strategy, according to a recent report by Bloomberg.
The majority of Bitcoin pandemic-era gains were made outside regular trading hours. Many traders started taking advantage of such a strategy, which has seemingly become a self-fulfilling prophecy.
Those who would buy Bitcoin at the close of the stock market and then buy it at the open would have gained around 270%. This could be explained by the high level of correlation between cryptocurrencies and US stocks. Since Bitcoin acts as a risky asset, it is no surprise that its price action is highly dependent on the stock market.
Both assets react similarly to changes in the macro environment. For instance, Bitcoin and equities sold off after the recent consumer price index (CPI) update surprised to the upside, thus signaling even more rate hikes.
Intraday strength
However, Jake Gordon of Bespoke Investment Group, noticed that the proven strategy stopped working. Over the past month, those who would buy the US stock market open and sell the close actually made higher gains.
Gordon struggled to pinpoint the exact reason why the new trend has emerged, but he believes that it might be linked to the fact that the news cycle becoming busier during the after-hours market recently.
Over the past few weeks, the crypto industry has been hit with a deluge of bad news regarding the downfall of top companies such as Celsius and Three Arrows Capital.
