From 2014 to 2023, the cryptocurrency market experienced a post-Christmas "Santa Claus Rally" 8 times in 10 years. During the week from December 27 to January 2 of the following year, the total cryptocurrency market capitalization increased by 0.69% to 11.87%. This phenomenon draws inspiration from the definition by Yale Hirsch, who is credited with coining the term "Santa Claus Rally," originally referring to the market performance during the last five trading days of the year and the first two trading days of the new year.
On the other hand, the occurrence of a "Santa Claus Rally" in the cryptocurrency market during the week leading up to Christmas is less common, happening only 5 times in the past 10 years. Similar to the post-Christmas rally, these pre-Christmas increases ranged from 0.15% to 11.56%.
1. How Has the "Santa Claus Rally" Performed in the Cryptocurrency Market?
In years without a "Santa Claus Rally," the largest pre-Christmas market correction occurred in 2017, when the cryptocurrency market dropped by 12.12%. This was a result of the price crash following the ICO boom that year. Apart from this, pre-Christmas market corrections were relatively small, ranging from 0.74% to 1.25%. Meanwhile, post-Christmas market corrections in 2021 and 2022 recorded declines of 5.30% and 1.90%, respectively.
Notably, in the past 10 years, only 3 years saw the cryptocurrency market experience a "Santa Claus Rally" both before and after Christmas. These years were:
- 2016: The total cryptocurrency market capitalization rose by 11.56% before Christmas and 10.56% after Christmas.
- 2018: Despite the overall market being in a correction phase that year, there were moderate gains of 1.31% before Christmas and 4.53% after Christmas.
- 2023: In a recovering bear market environment, the crypto market rose by 4.05% before Christmas and 3.64% after Christmas.
In contrast, the performance of the cryptocurrency market throughout December has been more extreme. Over the past 10 years, 5 Decembers saw overall market growth ranging from 16.08% to 94.19%, while in the other 5 years, market declines ranged from 1.73% to 15.56%.
Overall, the "Santa Claus Rally" in the cryptocurrency market is not a consistent phenomenon, with significant variations making it difficult to predict.
2. Will Bitcoin Rise During the Christmas Period?
In the past 10 years, Bitcoin experienced a "Santa Claus Rally" 7 times during the week leading up to Christmas and 5 times during the week after Christmas. Specifically, Bitcoin's pre-Christmas gains ranged from 0.20% to 13.19%, while post-Christmas gains ranged from 0.33% to 10.86%. This aligns with the broader cryptocurrency market's "Santa Claus Rally" performance.
Bitcoin's largest "Santa Claus Rally" occurred in the week before Christmas in 2016, when its price surged by 13.19%, breaching the $1,000 mark.
On the other hand, Bitcoin's largest decline during this period was in 2017, but it did not coincide with a "Santa Claus Rally." During that time, Bitcoin's price fell by 21.30% before Christmas. Additionally, Bitcoin experienced small declines before Christmas in 2015 and 2019, at 1.37% and 0.11%, respectively. Post-Christmas, Bitcoin's price corrections ranged from -0.04% to -6.42%.
In other words, if a speculator had participated in Bitcoin's "Santa Claus Rally" every year from 2014 to 2023—buying the week before Christmas and selling afterward—their average return would have been 1.32%. Conducting the same operation during the week after Christmas would have yielded an average return of 1.29%. In comparison, if the speculator had chosen to engage in Bitcoin price movements throughout December, the average return would have been 9.48%, which is at least 7 times higher than the returns from the "Santa Claus Rally."
However, similar to the broader cryptocurrency market, Bitcoin's "Santa Claus Rally" effect also exhibits inconsistent characteristics.
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