From 2014 to 2023, the cryptocurrency market had 8 instances of a “Santa Claus Christmas Rally,” where the total market capitalization of cryptocurrencies increased from 0.69% to 11.87% during the week of December 27 to January 2 of the following year. This trend was borrowed from Yale Hirsch, who is believed to have first used the term “Santa Claus Christmas Rally,” to refer to the market dynamics of the last five trading days of the year and the first two trading days of the following year.
On the other hand, in the cryptocurrency market, the number of instances of 'Christmas trading' on Christmas Eve was lower than the following Christmas, occurring only 5 times in the last 10 years. Similar to the post-Christmas trading, these pre-Christmas surges ranged from 0.15% to 11.56%.
How does the "Christmas market" manifest itself in the cryptocurrency market?
In years without a “Santa Claus Christmas Market,” the cryptocurrency market experienced its biggest correction before Christmas 2017, falling 12.12%. This decline is the result of a sharp drop in prices after the popularity of ICOs that year. Other than that, the cryptocurrency market’s pre-Christmas correction was minor, ranging from 0.74% to 1.25%. Meanwhile, the post-Christmas market correction in 2021 and 2022 was 5.30% and 1.90%, respectively.
It is worth noting that over the past 10 years, only 3 years have seen a “Christmas market situation” in the cryptocurrency market, both before and after Christmas. These 3 years were as follows:
In 2016, the total market value of cryptocurrencies increased by 11.56% before Christmas and by 10.56% after Christmas.
In 2018, despite a market correction throughout the year, moderate gains amounted to 1.31% and 4.53%, respectively, before Christmas.
In 2023, amid a bear market recovery, the cryptocurrency market grew by 4.05% before Christmas, and by 3.64% after Christmas.
In comparison, the total market cap of cryptocurrencies was more extreme throughout December. Over the past 10 years, during 5 years, the total market cap increased by 16.08% - 94.19% in December. And in the other 5 years, when there was a correction, the market decline in December ranged from 1.73% to 15.56%.
Overall, the "cryptocurrency Christmas market" is not a stable phenomenon, its performance varies significantly and is difficult to predict.
2. Will Bitcoin surge during Christmas?
Over the past 10 years, Bitcoin has been in a “Christmas market” 7 times in the week before Christmas and 5 times after Christmas. Specifically, Bitcoin’s growth before Christmas ranges from 0.20% to 13.19%, while after Christmas, this growth ranges from 0.33% to 10.86%. This is consistent with the general phenomenon of “Christmas markets” in the cryptocurrency market.
The biggest Bitcoin Christmas rally occurred in 2016 before Christmas, when Bitcoin prices rose by 13.19% and crossed the $1,000 mark.
The biggest drop in Bitcoin prices occurred in 2017, not during the “Christmas rally.” Then, the price of Bitcoin fell by 21.30% before Christmas. In addition, Bitcoin also experienced small declines before Christmas in 2015 and 2019, by 1.37% and 0.11%, respectively. And after Christmas, the price of Bitcoin fell from -0.04% to -6.42%.
In other words, if a speculator participated in the so-called Bitcoin “Christmas Market” every year from 2014 to 2023, buying and selling before Christmas, his average return would be 1.32%, and if he did the same after Christmas, the average return would be 1.29%. In comparison, if a speculator decided to participate in the Bitcoin price fluctuations throughout December, his average return would be 9.48%, which is at least 7 times higher than the return from the “Christmas Market”.
However, similar to the "Santa Claus Christmas market" in the cryptocurrency market, Bitcoin's "Santa Claus Christmas market" effect also exhibits inconsistency.
3, the 'Santa Claus' effect on the cryptocurrency market over the past 10 years
Below is data on the “Santa Claus” effect, which was compiled based on statistics of changes in the total market value of cryptocurrencies on a daily basis.
Bitcoin's "Santa Claus Effect" data for each year, based on the daily percentage change in Bitcoin's price during each specific time period:
4. Summary: Methodology
Based on data from CoinGecko, this study examines the percentage change in the total daily crypto market capitalization over the past decade, i.e. from December 1, 2014 to January 2, 2024. The study discusses the two most commonly used definitions of the “Santa Claus effect” or “Santa Claus market” on Investopedia:
Before Christmas: This means the week before Christmas, from December 19th to 25th.
Late Christmas: means the last five trading days of the year, as well as the first two trading days of the following year.
The research is intended for explanation and informational purposes only and does not constitute financial advice. Please do your own research and exercise caution before investing in any cryptocurrency or financial asset.
