In December 2024, the Bitcoin market was tumultuous, with significant price fluctuations. During the trading session on December 23, Bitcoin's price fell below $92,500, setting a new low for the past four weeks, a substantial 14.5% correction compared to the historical peak of $108,000 reached in November. Such a sharp decline undoubtedly poured cold water on investors' eager expectations for a 'Santa Claus Rally'. Generally speaking, in the last few days of the year, from Christmas to New Year, the cryptocurrency market often sees a rebound, which investors commonly refer to as the 'Santa Claus Rally', and they hold high hopes for it.
Looking back, the cryptocurrency market often experiences noticeable 'Santa Claus Rally' phenomena in December each year. Specifically, from the last few days of December to early January of the following year, market prices mostly show a short-term upward trend. Historical data shows that during peak periods of cryptocurrency cycles in 2016 and 2020, the prices of Bitcoin and other cryptocurrencies surged significantly in the few days after Christmas, with substantial increases. However, as time has passed, in 2024, the market did not recreate this classic rally as investors hoped; instead, Bitcoin's price continued to decline in mid to late December, which was quite surprising.
According to detailed data provided by CoinGecko, during the entire decade from 2014 to 2023, the market performance after Christmas was mostly commendable, with 8 out of the 10 years successfully experiencing a 'Santa Claus Rally'. During the specific period from December 27 to January 2 of the following year, the total market capitalization of the cryptocurrency market surged between 0.7% and 11.8%, achieving remarkable results. However, market trends are always difficult to predict entirely, and 2021 became an exception, as Bitcoin's price suffered a heavy blow and fell significantly. Now in 2024, which is a critical node in Bitcoin's development cycle, many analysts boldly predict that 2025 is very likely to become another peak year for the Bitcoin market.
Delving into the reasons behind Bitcoin's recent decline, the Federal Reserve's monetary policy is undoubtedly one of the important factors. In December 2024, the Federal Reserve announced a 25 basis point rate cut, adjusting the benchmark interest rate to a range of 4.25% - 4.5%. Typically, a lower interest rate environment usually benefits risk assets like Bitcoin; however, the Federal Reserve's cautious stance on interest rate cuts has caused significant shocks to the risk asset market. On one hand, the constant hawkish rhetoric from the Federal Reserve has caused concern among market participants; on the other hand, the reduced expectations for rate cuts have made the market uneasy, with various factors intertwining, ultimately leading to a correction in Bitcoin's price.
Additionally, the Federal Reserve hinted that the number of rate cuts in 2025 may be lower than market expectations, which has triggered deep concerns among many market participants, akin to a bombshell announcement. Currently, U.S. inflation levels remain above the 2% target, and in such a macro environment, market expectations for Bitcoin's long-term performance have naturally become increasingly cautious.
Although Bitcoin has recently faced a price decline, it is reassuring that investors and analysts maintain an optimistic attitude toward Bitcoin's future development prospects, largely due to the steadfast support of institutional investors. MicroStrategy has once again become the focus of the market. On December 23, 2024, the company announced that it had purchased an additional 5,262 Bitcoins, bringing its total Bitcoin holdings to an impressive 444,262. Since 2020, MicroStrategy has embarked on a journey of continuously increasing its Bitcoin purchases, and this latest move undoubtedly further solidifies the market's confidence in Bitcoin.
Furthermore, MicroStrategy has meticulously planned to increase the company's stock issuance through a shareholder vote. Once this plan is successfully implemented, it is expected to raise a massive amount of funds for the company. The subsequent flow of these funds is likely to further drive MicroStrategy to expand its Bitcoin acquisition scale, thereby strongly boosting the growth in Bitcoin market demand. It is not difficult to see that this series of strategic layouts by MicroStrategy not only solidifies its position as a pioneer in Bitcoin investment but also injects a shot of confidence into the entire cryptocurrency market, creating a rather optimistic market expectation.
Looking at another set of data, according to Coinglass statistics, the recent capital flow of Bitcoin ETFs has also had a significant impact on the market. Since December 19, U.S. Bitcoin ETFs have experienced net outflows for three consecutive days, with outflows exceeding $1 billion, such a large-scale withdrawal has triggered short-term market fluctuations. Indeed, these outflowing funds may exert some pressure on Bitcoin’s price in the short term, but from a long-term perspective, as Bitcoin ETFs continue to mature, market demand for Bitcoin is likely to remain strong.
Looking ahead to the upcoming year 2025, the prospects for the cryptocurrency market are indeed exciting and optimistic. There are reasons to believe that the Trump administration is likely to have a positive impact on the development of Bitcoin and the cryptocurrency industry. During the campaign, Trump clearly stated that he would vigorously promote Bitcoin reserve plans, and once this policy is implemented, it is expected to bring numerous favorable supports to the market. Moreover, looking at the composition of Trump's new cabinet, there are several key figures who firmly support the development of cryptocurrencies, which undoubtedly adds some assurance for the policy's implementation. At the same time, other countries are also actively promoting Bitcoin reserve plans, and this series of signals fully indicates that the global recognition of Bitcoin and cryptocurrencies is gradually increasing.
In summary, as institutions continue to adopt Bitcoin at an accelerating pace, coupled with increasing policy support, Bitcoin and the entire cryptocurrency industry are expected to usher in a new cycle of robust growth. It is likely that 2025 will become the next peak year for Bitcoin, especially given the current continuous growth in global demand for Bitcoin, everything is worth looking forward to. Despite a brief price correction in December 2024, especially after the disappointing 'Santa Claus Rally', market sentiment was once low, but overall, the market remains optimistic about Bitcoin's future. The direction of the Federal Reserve's monetary policy, MicroStrategy's ongoing investment actions, and potential policy support from the Trump administration all act as strong engines, providing continuous momentum for Bitcoin's future rise. From a long-term perspective, institutional investors' recognition of Bitcoin is growing day by day. Even if Bitcoin's price may face fluctuations in the short term, with the steady increase in global acceptance of Bitcoin, the future of the cryptocurrency market is undoubtedly full of hope and looks bright.
