Bitcoin has been navigating turbulent waters recently. With its price slipping to $92,442, marking a 14.5% decline from its peak of $108,000, investors are left questioning the likelihood of a “Santa Claus rally” as the year comes to a close. Although Bitcoin has shown some recovery, climbing to approximately $94,000, it remains over 11% down from the previous week. The pressing question is whether the holiday season will bring the anticipated boost or if these fluctuations signal a more enduring trend.
The Santa Claus Rally: Will It Show Up?
Historically, the holiday season has often brought positive performance to the cryptocurrency markets, especially in years preceding market peaks. Take, for instance, the rallies observed in 2016 and 2020, which preceded significant all-time highs for crypto prices. Research from CoinGecko reveals that from 2014 to 2023, the crypto market experienced a post-Christmas rally in 8 out of 10 years. On average, market capitalizations increased by 0.7% to 11.8% between December 27 and January 2, providing a glimmer of hope for those banking on the Santa Claus rally to deliver much-needed cheer.
However, not every holiday season unfolds in this manner. In 2021, Bitcoin had already plummeted by 26% by Christmas and continued its downward trajectory throughout 2022. Despite these setbacks, many enthusiasts remain optimistic about 2025, anticipating a significant upswing in alignment with Bitcoin’s traditional four-year market cycle.
What’s Happening Now?
The current downturn in Bitcoin’s price challenges expectations typically associated with a Santa Claus rally. Nevertheless, several upcoming events could potentially shake up the market dynamics. Notably, around December 27, about $18 billion in Bitcoin and Ether options contracts are set to expire, which could introduce significant volatility and potentially alter Bitcoin’s price trajectory. Furthermore, Bitcoin’s social sentiment hit its lowest point of the year in late December, which some interpret as a precursor to potential recovery.
Analyzing Bitcoin’s historical performance around Christmas reveals a mixed bag. In some years, significant surges were recorded, while other years witnessed notable declines. When considering the entire month of December, Bitcoin has typically produced decent average returns. This suggests that focusing on the entire month might be more profitable than zeroing in solely on the Santa Claus rally.
What to Expect
As the end of 2024 approaches, all eyes are on Bitcoin’s next steps. Will it manage to rebound, or will it continue to face headwinds? There remains a glimmer of hope that Bitcoin might defy expectations in the closing days of December. The expiration of options contracts and potential shifts in market sentiment could provide the catalyst needed for a surprise rally. Investors and market watchers alike are eagerly awaiting to see how these factors will play out, potentially setting the stage for Bitcoin’s performance in the new year.
