Will Bitcoin Hit New Heights this Christmas After Its $106K All-Time High?

Bitcoin, as the leading cryptocurrency, often shows significant changes in its value during the last weeks of December. Against this backdrop, the discussion of the so-called "Santa Claus Rally" has become one of the intriguing topics among traders and investors. 

This phenomenon typically reflects a seasonal increase in asset prices towards the end of the year, which could be linked to a surge in purchases during the holiday period. Let’s figure out when it's best to buy Bitcoin before the holidays, with a little help from Santa.

Bitcoin's Behavior During "Santa Claus Rally" 

The term "Santa Claus Rally" is attributed to Yale Hirsch, used to describe market performance during the last five trading days of the year and the first two trading days of the following year.

In the history of crypto, there have been several notable instances of such rallies, where market capitalization increases at the end of the year. According to research by Coingecko, from 2014 to 2023, the Santa Claus Rally effect was observed in 8 out of 10 instances.

The essence of the phenomenon is that, from December 27 to January 2, the market capitalization of cryptocurrencies typically increases by 0.69% to 11.87%. This coincides with the traditional rise in market activity during the holiday period, often linked to an uptick in trading volumes and growing optimism among investors.

Interestingly, the "Santa Claus Rally" in the cryptocurrency space most often appears after Christmas, while pre-Christmas capitalization increases are observed less frequently — only 5 times in the last 10 years. The reasons for this distribution can vary, including reduced liquidity before the holidays and an increase in purchases from institutional and retail investors after Christmas.  

Bitcoin often serves as an indicator of the overall market dynamics. Over the past 10 years, Bitcoin has experienced a "Santa Claus Rally" 7 times during the week before Christmas and 5 times after. In 2016, when Bitcoin returned to the $1000 mark, its growth reached 13.19% before Christmas, one of the largest recorded increases.

However, in some years, Bitcoin also experienced declines, which are part of the broader market volatility. For example, in 2017, Bitcoin saw a significant drop of 21.30% before Christmas, making it one of the largest pullbacks.

Factors Affecting Prices at the End of 2024

Bitcoin hit a new all-time high, surpassing $106,000 on December 15. One of the key factors driving this price surge is the belief that Bitcoin could become the official reserve asset of the United States. This view gained traction following a statement by Jack Mallers, CEO of Strike, who suggested that Donald Trump might introduce Bitcoin as the official reserve asset of the U.S. as early as the first day of his second term, January 20.  

The Federal Reserve is expected to cut interest rates by 0.25% on December 18, which could further boost Bitcoin prices in the coming months. 

Moreover, potential changes in legislation and the passing of new bills, such as Bitcoin reserving at the state level, could also support the price growth.  

Dennis Porter, CEO of the Satoshi Action Fund, mentioned that a third Bitcoin reserve bill is in development at the state level, though he didn’t specify which state might follow in the footsteps of Texas and Pennsylvania.

Porter added that he expects at least 10 states to introduce Bitcoin reserve bills in total.  

Possible Corrections

Despite the positive forecasts for Bitcoin, such as the expected rise to $125,000 in 2025, CK Zheng, chief investment officer of ZK Square, warns of possible corrections of 30% if the market becomes oversaturated with positive news. Such a correction could push the price down to $87,500, which is part of the natural volatility of the cryptocurrency markets.  

Nevertheless, long-term forecasts for Bitcoin and other cryptocurrencies remain optimistic, given the growing interest in digital assets.

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