Crypto Market Santa Rally is in Town: BTC and ETH Set to Soar?

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A Santa Claus rally is typically seen in US equity markets. The US S&P 500 index has posted an average gain of 1.3% during Christmas-New Years holidays between 1950 and 2022. So can the crypto markets follow suit?

The most wonderful time of the year is upon us. Almost every year, the US stock market shows a tendency to give positive returns during the Christmas holiday season. Will the crypto market showcase a similar price trend this Christmas?

In this article, we explain what a Santa Claus rally is and explore the possibilities of a crypto market Santa rally. You will also find compiled data on Bitcoin (BTC) and Ethereum (ETH) prices during the holiday season over the last ten years.

What is a Santa Claus Rally?

A Santa Claus rally is a financial market phenomenon typically seen in equity markets where stock prices tend to increase around the Christmas holidays.

The term “Santa Claus rally” was coined by stock market analysts in the 1970s who noticed that stock prices rallied between the first day of trading after Christmas up to the first two trading days of the new year.

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According to Stock Trader’s Almanac, the US equity benchmark S&P 500 index has posted an average gain of 1.3% during the last five trading days of December and the first two trading days of January between 1950 and 2022.

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We looked up historical S&P 500 data and saw that the US equity index has seen a Santa Claus rally in the last three years, producing returns of about 1%, 1.2% and 0.8% in 2020, 2021 and 2022, respectively.

Historical market data proved that Santa Claus rally in the equity market is genuine and not a fairy tale. What about the crypto market? Is there a tendency for the festive cheer to spread across to cryptocurrency markets?

Let’s study historical crypto market data over the last decade to check whether BTC and ETH prices have rallied alongside stocks during the Christmas week. Since crypto markets operate 24/7, we looked at historical markets from the last week of December and the first two days of January.

Bitcoin is not on Santa’s good list

Asset Year Open price on 25 December Close price on 2 January of the new year Return
BTC 2013 $659 $788 +19.5%
BTC 2014 $320 $315 -1.5%
BTC 2015 $455 $435 -4.3%
BTC 2016 $895 $997 +11.3%
BTC 2017 $13760 $14882 +8.2%
BTC 2018 $4033 $3886 -3.6%
BTC 2019 $7252 $6942 -4.2%
BTC 2020 $23718 $32238 +35.9%
BTC 2021 $50834 $47304 -6.9%
BTC 2022 $16836 $16669 -1%

The BTC/USD data source used was from Kraken on TradingView. We chose Kraken’s data because it was the oldest data source among the top 3 centralized exchanges in the world.

Techopedia’s observations:

  • Historical BTC/USD data showed that bitcoin prices declined six times out of ten Christmas-New Year holidays between 2013 and 2022.
  • Bitcoin prices jumped during Christmas 2013 (+19.5%) and Christmas 2017 (8.2%) during the dying embers of Bitcoin’s first two bull runs.
  • The other two instances when bitcoin prices gained were in Christmas 2016 (+11.3%) and Christmas 2020 (+35.9%) — the cryptocurrency market went on to break record highs in the new year (2017 and 2021).
  • Based on the historical BTC/USD data study, we cannot confidently conclude that the bitcoin markets will mirror equity market trends to rally during Christmas week.

Ether (ETH) follows BTC price trends during Christmas

Asset Year Open price on 25 December Close price on 2 January of the new year Return
ETH 2015 $0.86 $0.95 +10.5%
ETH 2016 $7.2 $8.4 +16.6%
ETH 2017 $666.5 $864 +29.6%
ETH 2018 $139 $153.5 +10.4%
ETH 2019 $127.7 $126.7 -0.8%
ETH 2020 $612 $775 +26.6%
ETH 2021 $4050 $3832 -5.4%
ETH 2022 $1220 $1213 -0.6%

The ETH/USD data source used was from Kraken on TradingView. We chose Kraken’s data because it was the oldest data source among the top 3 centralized exchanges in the world.

Techopedia’s observations:

  • Historical ETH/USD data showed that ether prices declined three times out of eight Christmas-New Year holidays between 2015 and 2022.
  • ETH price movements between 2015 and 2018 showcased divergence from Bitcoin price movement during the Holiday season.
  • ETH has followed bitcoin price trends after 2019.

What Causes a Santa Claus Rally?

The reason why financial markets tend to rally during Christmas week can be traced back to a number of reasons. The chief among them is the festive spirit during the year-end holidays. This time of the year is fueled with optimism and increased spending. Retail investors may even gift cryptocurrencies to themselves or their loved ones during this time.

Market analysts have also pointed to traders going on vacations and institutional investors closing their books during Christmas week as a key reason why Santa Claus rallies occur. The combination of lower-than-average market liquidity and optimistic retail investors may be the cause of Santa Claus rallies.

Will There Be a Crypto Santa Claus Rally?

Our bull case for a crypto Santa Claus rally occurring in 2023 leads us back to our study of historical BTC/USD prices.

Bitcoin Santa Claus rallies that occurred in Christmas week 2016 (+11.3%) and Christmas 2020 (+35.9%) came after BTC had bounced back from cyclic bottoms. BTC was showing strong signs of breaking out into a new bull run.

In 2016, BTC posted four straight months of gains between September and December. In 2017, BTC went to hit a then-record high of over $19,000.

In 2020, BTC saw three straight months of gains between October and December. And then, in 2021, BTC went to hit a then-record high of about $69,000.

We are seeing similar trends in 2023. BTC has seen three straight months of gains between September and November. The bellwether crypto is on track to post monthly gains in December 2023.

It is important to remind ourselves that the study is based completely on historical BTC/USD price movement. There is no guarantee that the market will rally again.

The Bottom Line

A crypto Santa Claus rally is on everyone’s wish list. Those preparing to trade during the Christmas week must be mindful of the unpredictability and high volatility of the cryptocurrency market. Plan ahead and use stop-loss and limit orders to protect your market positions.

You should always do your own due diligence before investing and trading. Therefore, this article should not be considered investment advice and is for information purposes only.

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Mensholong Lepcha
Crypto & Blockchain Writer
Mensholong Lepcha
Crypto & Blockchain Writer

Mensholong is an experienced crypto and blockchain journalist, now a full-time writer at Techopedia. He has previously contributed news coverage and in-depth market analysis to Capital.com, StockTwits, XBO, and other publications. He started his writing career at Reuters in 2017, covering global equity markets. In his free time, Mensholong loves watching football, finding new music, and buying BTC and ETH for his crypto portfolio.