How Often Do Christmas Miracles Happen in Cryptocurrencies?
Christmas is coming, hope Santa rallies Bitcoin and the rest of the cryptocurrencies are disappearing fast. But what exactly is this phenomenon, and how often have Christmas miracles occurred in the past?
What is a Santa Claus rally? Bitcoin Bulls' Most Wanted Gift
A Santa Claus rally is defined as a "calendar effect" that happens right around the holiday. According to Investpedia , there is some slight disagreement on the exact timing of Santa's rally. One camp claims it's Christmas Eve, when stockholders receive gifts early, while the other says it's the week after Christmas, until Jan. 2.
The idea behind the rally is the same: Investors, suddenly ecstatic over the holiday cheer, are considering year-end tax-related repositioning and often have new Christmas bonuses to spend. Low volume and liquid holiday market conditions allow prices to move faster, like Dasher, Dancer, Prancer and Vixen in a snowy night sky.
Investopedia further concluded that the idea behind the Santa Claus rally doesn't hold much validity when analyzing the S&P 500's returns over the period. But what about Bitcoin and cryptocurrencies where retail investors dominate the market and trade around the clock (even at Christmas)?
The complete history of holiday seasons in crypto | BTCUSD on TradingView.com
The Scrooge Effect: Bears Say Bah Humbug on Possible Crypto Rally
The graph above depicts an encrypted version of the Santa Claus rally , taking into account the weeks around the annual holidays.
For just pennies, the breakout Christmas rally continued until Bitcoin hit $40 for the first time. The price action for December 2011 was more red than green.
The next Santa Claus rally had been delivering gifts to cryptocurrency holders for almost a full year until it happened in December 2013, and one of the worst downtrends on record continued until December 2014. Bitcoin reached its final bear market bottom days after Christmas.
The next two Christmases in 2015 and 2016 were merry and bright for Bitcoin bulls. But as 火星消息 it turns out, excitement peaked around Christmas in December 2017, leading to yet another bear market.
In 2018, we marked December in blue, the most neutral of all holiday price action. Although Bitcoin had fallen before, it bottomed out and started a new bull run in the next few months. It's hard to call this price action bullish or bearish.
Just like the 2015 and 2016 bull markets experienced back-to-back green seasons, so too did cryptocurrency investors in December 2019 and December 2020. In fact, December 2020 brought BTC to an all-time high — the first time since December 2017. The time high was set in 2021, but by December, it was back to a brutal downtrend for cryptocurrencies.
A year on, the chart above does give us some clues as to what might happen next. Bitcoin suffered two consecutive Decembers of miser-like behavior in the crypto industry during two of the biggest bear markets. While we call the second December neutral for the second bear market, it is by no means bullish either.
Given this pattern, the cyclical rhythm of December could give investors another coal this year. However, judging by the numbers alone, there is a roughly 50/50 chance that this holiday will be something to celebrate in crypto as a whole.
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