Translation: Blockchain in Plain Language
From 2014 to 2023, there were 8 instances of a 'Santa Claus Rally' in the cryptocurrency market after Christmas, with the total market capitalization rising between 0.69% and 11.87% during the week from December 27 to January 2 of the following year. This phenomenon draws on the definition by Yale Hirsch, who is considered the originator of the term 'Santa Claus Rally', originally referring to market performance during the last five trading days of the year and the first two trading days of the following year.
On the other hand, there were fewer instances of the 'Santa Claus Rally' in the week before Christmas in the cryptocurrency market, occurring only 5 times in the past 10 years. Similar to the market after Christmas, these pre-Christmas increases ranged from 0.15% to 11.56%.
1. How does the 'Santa Claus Rally' perform in the cryptocurrency market?
In the years when the 'Santa Claus Rally' did not occur, the cryptocurrency market experienced the largest correction before Christmas in 2017, declining by 12.12%. This decline was a result of the price crash following the ICO boom that year. Apart from that, the corrections in the cryptocurrency market before Christmas were relatively small, ranging between 0.74% and 1.25%. Meanwhile, the market corrections 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 3 years where the 'Santa Claus Rally' appeared both before and after Christmas. These three years are:
In 2016, the total market capitalization of the cryptocurrency 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, under the environment of a recovering bear market, the cryptocurrency market rose by 4.05% before Christmas and by 3.64% after Christmas.
In contrast, the total market capitalization of cryptocurrencies showed more extreme performance throughout December. In the past 10 years, there were 5 years where the market overall grew between 16.08% and 94.19%. In the other 5 years where there was a correction, the market's decline in December ranged from 1.73% to 15.56%.
Overall, the 'Santa Claus Rally' in the cryptocurrency market is not a stable phenomenon, with significant variation in its performance, making it difficult to predict.
2. Will Bitcoin rise during the Christmas season?
In the past 10 years, Bitcoin experienced the 'Santa Claus Rally' effect 7 times in the week before Christmas and 5 times in the week after Christmas. Specifically, Bitcoin's increase before Christmas ranged between 0.20% and 13.19%, while the increase after Christmas ranged between 0.33% and 10.86%. This is consistent with the broader cryptocurrency market's 'Santa Claus Rally' performance.
The largest 'Santa Claus Rally' for Bitcoin occurred in the week before Christmas in 2016, when Bitcoin's price rose by 13.19%, breaking the $1,000 mark.
The largest decline in Bitcoin occurred in 2017, not during the 'Santa Claus Rally'. At that time, the price of Bitcoin fell by 21.30% before Christmas. Additionally, Bitcoin experienced smaller declines before Christmas in 2015 and 2019, at 1.37% and 0.11%, respectively. After Christmas, Bitcoin's price decline ranged 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 by buying a week before Christmas and selling afterward, their average return would be 1.32%; whereas doing the same operation a 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 would be 9.48%, at least seven times the return of the 'Santa Claus Rally'.
However, similar to the 'Santa Claus Rally' in the cryptocurrency market, the 'Santa Claus Rally' effect in Bitcoin also shows inconsistent characteristics.
3. The 'Santa Claus Effect' in the cryptocurrency market over the past 10 years
The following is the 'Santa Claus Effect' data based on the percentage change in the total market capitalization of cryptocurrencies on a daily basis:
Historical data on Bitcoin's 'Santa Claus Effect', based on daily percentage changes in Bitcoin's price during 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 on a daily basis over the past ten years (from December 1, 2014, to January 2, 2024). The study references 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, i.e., 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 illustrative and informational reference only, not financial advice. Please make sure to conduct your own research and operate cautiously before investing in any cryptocurrency or financial asset.
