Could Bitcoin Benefit From A Santa Claus Rally?

CNBC personality Jim Cramer has been pushing the possibility of a so-called “Santa Claus rally” in the stock market. But could this holiday-related trend have an impact on Bitcoin and cryptocurrencies?

Mad Money Host Calls For “Santa Claus Rally”

Bitcoin has taken a beating, substantially below what most of its backers believed it would close out for the year. The stock-to-flow model predicted between $ 100,000 and $ 288,000 per coin, but instead, the top cryptocurrency by market cap is below $ 50,000 or around half the lower of the two targets.

Related reading | Could an Elon Musk Time Magazine Cover Predict the Peak of the Crypto Cycle?

But the year is not over yet, and a possible Santa Claus rally narrative is slowly spreading across the world of stocks. CNBC Mad Money host Jim Cramer is giving the idea a big press. First, he tweeted explaining that today is the day he would normally start.

In Squawk Box, Cramer later revealed that if “you bought today and you only held out for even six days, you made money almost every year.”

According to Investopedia, a Santa Claus rally “describes a sustained rise in the stock market that occurs in the last week of December through the first two trading days of January.”

Statistics show that there is a markedly higher probability of a strong performance during these key dates according to the S&P 500. Such rallies are driven by retail and occur for a number of reasons including:

  • Increased investor enthusiasm during the holidays
  • A low volume environment due to holidays and vacations.
  • More sophisticated short sellers are on vacation
  • The end of collecting tax losses by institutional or wealthy investors

But does this phenomenon work for Bitcoin and cryptocurrencies?

BTCUSD_2021-12-21_15-42-33

Ho ho how much could crypto climb? | Source: BTCUSD on TradingView.com

Will Bitcoin rise this Christmas to the new year?

When reviewing past statistics related to Bitcoin price action around the last week of December in the first two trading days of January, the data shows that there is a lower probability of a Santa Claus rally in crypto than in stocks.

Only four years during that time frame have been positive for Bitcoin, with the most recent being last year. With far less data available than on the S&P 500, anything is possible when it comes to speculative digital assets.

Related reading | Bitcoin Falls Flat: Examining Uncommon Bull Market Corrective Pattern

Other seasonal data related to this same day could be more profitable. Today is also the winter solstice, which in the past has been very close to a peak, a bottom, or a break from its all-time high.

BTCUSD_2021-12-21_16-45-44

The Winter Solstice and Fibonacci | Source: BTCUSD on TradingView.com

Since this winter solstice failed to produce the peak of a rally, it could, as it has done in the past, put a short-term bottom that runs until the next equinox. And it may start with a Santa Claus rally.

Cryptocurrencies are remarkably low in volume compared to other markets, especially during the holidays. The presence of institutional tax loss pickup and more advanced short hedging positions could have kept the price of Bitcoin low during the month of December, but with that out of the way, retail could drive prices higher in the near term. .

But nevertheless, according to the person Whoever first mentioned a Santa Claus rally in The Stock Trader’s Almanac in 1972, Yale Hirsch, the rally itself is not the important thing. It is what comes in the following year that matters.

“What is important is not to capture this small rebound, but to use it as an indication of what can happen in the next year,” he said, calling it “an early indicator for next year.”

Hirsch’s father even came up with a phrase to help him remember: “If Santa doesn’t call, the bears can come to Broad and Wall.”

Follow @TonySpilotroBTC on Twitter or join the TonyTradesBTC Telegram for exclusive knowledge of the daily market and education in technical analysis. Please note: The content is educational and should not be considered investment advice.

Featured image from iStockPhoto, Charts from TradingView.com

Source: https://www.newsbtc.com/analysis/btc/could-bitcoin-benefit-from-a-santa-claus-rally/

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