The 2024 Santa Claus Rally Is Expected To Start Soon

The Santa Claus Rally: A Crypto Bull Market’s Gift

As we approach the end of 2024, investors are eagerly anticipating a phenomenon that has become synonymous with the holiday season: the Santa Claus rally. This unique event, which typically takes place during the final week of December and the first two trading days of January, has historically brought cheer to investment portfolios. But what’s behind this seasonal surge, and can we expect it to make an appearance in crypto markets?

The Origins of the Santa Claus Rally

The concept of a Santa Claus rally predates the advent of cryptocurrency by several decades. In 1972, Yale Hirsch coined the phrase ‘Santa Claus rally’ in his Stock Trader’s Almanac publication. Hirsch identified a pattern where the S&P 500 index tended to rise during the final December and early January trading days. This seven-day period has historically yielded positive returns, with the S&P 500 gaining an average of 1.3% since 1950 as of 2020.

The Science Behind the Santa Claus Rally

So, what’s behind this phenomenon? Several reasons have been postulated as to why the stock market tends to perk up at the tail end of the year, ranging from the rational to the distinctly irrational. Some possible explanations include:

• Tax-loss harvesting: Investors may be looking to invest in tax-loss harvesting before year-end, selling underperforming stocks to offset capital gains and reinvesting in the market.
• Fund manager behavior: Fund managers might purchase high-performing stocks at year-end to enhance the appearance of their portfolios in annual reports.
• Reduced trading volumes: With many investors on holiday, reduced trading volumes can lead to less volatility and a gradual upward drift in stock prices.

However, these explanations may not apply to crypto markets, which are subject to unique dynamics. The industry remains more volatile than traditional markets, with double-digit moves in a single day being the norm during bull markets.

Why Crypto Might Just Get a Gift

One theory that applies to the Hirsch model works neatly with crypto: The festive season brings increased consumer spending and a general sense of optimism, which can positively influence market sentiment. People have gotten their annual bonus, are bored, and have time – it’s the perfect time for a bit of speculation on the market.

While the Santa Claus rally is a well-documented phenomenon in traditional stock markets, its presence in cryptocurrency is less clear. Cryptocurrencies don’t always follow equities’ seasonal patterns, but there is another trend that can be applied to this model: whether or not the market is in a bull run.

A Crypto Crimbo on the Cards?

Crypto firmly checks that box right now, making a compelling case for a severe rally coming together as the year draws close. In late 2017, for example, BTC rallied by 68% over the two weeks spanning the New Year. Subsequent years have been more muted, in line with the prevailing market mood at the time.

The Case for Filling Your Conviction Bags

If traders buy into the Santa Claus rally thesis, they don’t need to create a prediction market to speculate on the likelihood – although nothing is stopping them. In crypto, financial freedom comes as a standard. A more intelligent strategy is filling one’s conviction bags before the year-end. Load up on the assets you believe in the most, and then sit back and let the prophecy unfold.

The Global Economic Landscape

As 2024 closes out, the global economy presents a mix of optimism and caution. The global economy has shown resilience, with many sectors rebounding from previous downturns. Consumer spending during the holiday season is expected to be robust, bolstering market sentiment.

Even if the Santa Claus rally proves to be a damp squib on this occasion, it’s no biggie: The bags investors have accumulated now are likely to stand them in good stead next year as the crypto market continues to grind higher. They don’t have to leave a glass of milk and some cookies out, but there’s no excuse for not being ready for Santa this Christmas.

Conclusion

The Santa Claus rally is a phenomenon that has captivated investors for decades, and its presence in crypto markets is more likely than ever. While the outcome is far from certain, one thing is clear: crypto is on the cusp of a major bull run, and those who are prepared will be well-positioned to reap the rewards.

About the Author

Gracy Chen is the CEO of Bitget. Before this role, she held executive positions at XRSpace, and was an early investor in BitKeep. This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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