Author: Lim Yu Qian
Translation: Blockchain in Vernacular
From 2014 to 2023, the crypto market experienced a post-Christmas "Santa Claus rally" eight times in 10 years, with the total crypto market value rising by 0.69% to 11.87% in the week from December 27 to January 2 of the following year. This phenomenon draws on the definition of Yale Hirsch, who is considered to be the originator of the term "Santa Claus rally", which originally refers to the market performance in the last five trading days of each year and the first two trading days of the following year.
On the other hand, crypto markets have seen fewer “Santa Claus rallies” in the week before Christmas, with only five of them happening in the past 10 years. Similar to the post-Christmas rallies, these pre-Christmas rallies ranged from 0.15% to 11.56%.
1. How does the “Santa Claus Market” perform in the crypto market?
Among the years without a Santa Claus rally, the crypto market experienced the largest pullback before Christmas in 2017, falling 12.12%. This drop was the result of the price crash after the ICO boom that year. Apart from this, the crypto market's pullback before Christmas was smaller, ranging from only 0.74% to 1.25%. Meanwhile, the market's pullbacks after Christmas in 2021 and 2022 were 5.30% and 1.90%, respectively.
It is worth noting that in the past 10 years, there have only been three years in which the crypto market’s “Santa Claus market” appeared around Christmas. These three years are:
In 2016, the total market value of the crypto market rose by 11.56% before Christmas and 10.56% after Christmas;
In 2018, despite the market correction throughout the year, modest gains of 1.31% and 4.53% were recorded around Christmas;
In 2023, amid a bear market recovery, the crypto market rose 4.05% before Christmas and 3.64% after Christmas.
In contrast, the performance of the total crypto market capitalization throughout December is even more extreme. In the past 10 years, in 5 of the 10 years, the market has grown by 16.08% to 94.19% in December. In the other 5 years of correction, the market fell by between 1.73% and 15.56% in December.
Generally speaking, the "Santa Claus market" in the crypto market is not a stable phenomenon, and its performance varies significantly and is difficult to predict.
2. Will Bitcoin rise during Christmas?
In the past 10 years, Bitcoin has experienced a "Santa Claus rally" seven times in the week before Christmas, and five times in the week after Christmas. Specifically, Bitcoin's gains before Christmas ranged from 0.20% to 13.19%, while its gains after Christmas ranged from 0.33% to 10.86%. This is consistent with the performance of the broader crypto market's "Santa Claus rally."
Bitcoin’s biggest “Santa Claus rally” occurred in the week before Christmas in 2016, when the price of Bitcoin rose 13.19% and broke through the $1,000 mark.
Bitcoin's biggest drop occurred in 2017, not the "Santa Claus market". At that time, the price of Bitcoin fell by 21.30% before Christmas. In addition, Bitcoin also experienced smaller drops before Christmas in 2015 and 2019, respectively, of 1.37% and 0.11%. After Christmas, the price of Bitcoin fell between -0.04% and -6.42%.
In other words, if a speculator participated in Bitcoin's "Santa Claus Rally" every year from 2014 to 2023, buying and selling in the week before Christmas, the average return would be 1.32%, while the same operation in the week after Christmas would have an average return of 1.29%. In contrast, if a speculator chose to participate in Bitcoin's price fluctuations throughout December, the average return would be 9.48%, at least 7 times the return of the "Santa Claus Rally".
However, similar to the “Santa Claus rally” in the crypto market, Bitcoin’s “Santa Claus rally” effect also exhibits inconsistent characteristics.
3. The “Santa Claus Effect” in the Crypto Market in the Past 10 Years
Here are the Santa Claus Effect statistics based on the percentage change in the total market value of the crypto market each day:
Bitcoin’s “Santa Claus Effect” data over the years, based on the daily percentage change in Bitcoin’s price in each specific time period:
4. Summary: Methodology
Based on data from CoinGecko, this study examined the percentage change in the total daily cryptocurrency market capitalization over the past decade (i.e., December 1, 2014 to January 2, 2024). The study referenced the two most commonly used definitions of the "Santa Claus Effect" or "Santa Claus Market" in Investopedia:
Pre-Christmas period: refers to the week before Christmas, which is December 19th to 25th.
Late Christmas: refers to the last five trading days of the year plus the first two trading days of the following year.
This research is for illustrative and informational purposes only and is not financial advice. Please always do your own research and exercise caution before investing in any cryptocurrency or financial asset.
