Author: Lim Yu Qian
Compiled by: Vernacular Blockchain
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 rally' perform in the crypto market?
In the years without a 'Santa Claus rally', the crypto market experienced the largest correction before Christmas in 2017, with a decline of 12.12%. This drop was a result of the price crash following the ICO boom that year. Aside from that, the correction in the crypto market before Christmas was relatively small, ranging only from 0.74% to 1.25%. Meanwhile, the market corrections after Christmas in 2021 and 2022 were 5.30% and 1.90%, respectively.
It is worth noting that only 3 years in the past 10 saw the 'Santa Claus rally' in the crypto market both before and after Christmas. These 3 years are:
In 2016, the total market capitalization of the crypto market rose by 11.56% before Christmas and by 10.56% after Christmas;
In 2018, despite the market being in a correction throughout the year, moderate increases of 1.31% and 4.53% were recorded before and after Christmas, respectively;
In 2023, in the context of a recovering bear market, the crypto market rose by 4.05% before Christmas and 3.64% after Christmas.
In contrast, the total market capitalization of the crypto market exhibited even more extreme performance throughout December. Over the past 10 years, in 5 of those years, the market overall grew by between 16.08% and 94.19% in December. Conversely, in 5 years of decline, the market's drop in December ranged from 1.73% to 15.56%.
Overall, the 'Santa Claus rally' in the crypto market is not a stable phenomenon, with significant variations in performance, making it difficult to predict.
2. Will Bitcoin rise during the Christmas period?
Over the past 10 years, Bitcoin has experienced the 'Santa Claus rally' 7 times in the week before Christmas and 5 times in the week after Christmas. Specifically, Bitcoin's price increase before Christmas ranged from 0.20% to 13.19%, while the increase after Christmas ranged from 0.33% to 10.86%. This is consistent with the broader performance of the 'Santa Claus rally' in the crypto market.
The largest 'Santa Claus rally' for Bitcoin occurred in the week before Christmas in 2016, when the price rose by 13.19% and broke above the $1000 mark.
The largest drop in Bitcoin occurred in 2017, rather than during the 'Santa Claus rally'. At that time, Bitcoin's price dropped by 21.30% before Christmas. Additionally, Bitcoin experienced smaller drops before Christmas in 2015 and 2019, of 1.37% and 0.11%, respectively. After Christmas, Bitcoin's price decline ranged from -0.04% to -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, their average return would be 1.32%; whereas performing the same operation in the week after Christmas would yield an average return of 1.29%. In contrast, if the speculator chose to participate in Bitcoin price fluctuations throughout December, their average return rate would be 9.48%, at least seven 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 over the past 10 years
The following are the 'Santa Claus Effect' data based on the daily percentage changes in the total market capitalization of cryptocurrencies:
Bitcoin's historical 'Santa Claus Effect' data, based on the daily percentage change in Bitcoin prices over each specific time period:
4. Summary: Methodology
This study is based on data from CoinGecko and examines the percentage changes in the total market capitalization of cryptocurrencies over the past ten years (from December 1, 2014, to January 2, 2024). The study refers to the two most commonly used definitions of the 'Santa Claus Effect' or 'Santa Claus Rally' from Investopedia:
Pre-Christmas period: refers to the week before Christmas, from December 19 to 25.
Post-Christmas period: refers to the last five trading days of the year plus the first two trading days of the following year.
This study is for illustration and informational reference only and is not financial advice. Please conduct your own research and exercise caution before investing in any cryptocurrency or financial asset.
