CNBC personality Jim Cramer has been pushing the possibility of a so-called “Santa Claus rally” across the stock market. Could this holiday trend impact Bitcoin and other cryptocurrencies?
Mad Money Host Calls For “Santa Claus Rally”
Bitcoin is now in a much worse place than its supporters thought. Instead of the stock-to-flow model predicting between $100,000 and $288,000 per coin the market capital of top cryptos is just $50,000, or about half the amount of lower targets.
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But the year isn’t yet over, and a potential Santa Claus rally narrative is slowly spreading across the world of stocks. Jim Cramer (CNBC Mad Money) is giving the idea a lot of press. The first was a tweet by Cramer explaining that today would be the normal day for it to start.
Today is historically the date that Santa Claus rallies begin. It worked even during 2007-2009. This is why it’s hard to believe.
— Jim Cramer (@jimcramer) December 21, 2021
On Squawk Box, Cramer later revealed that if “you bought today and you just held on even for six days, you made money almost every single year.”
According to Investopedia, a Santa Claus rally “describes a sustained increase in the stock market that occurs in the last week of December through the first two trading days in January.”
Statistics show that there is a remarkably higher probability of strong performance during these key dates based on the S&P 500. These rallies, which are retail-driven, can occur due to a variety of reasons.
- Investor enthusiasm has increased around holidays
- Holidays and vacations create a low-volume environment
- Short-sellers who are more sophisticated and skilled travel
- Institutional or wealthy investors must stop tax-loss harvesting
However, does this phenomenon apply to Bitcoin and other crypto currencies?
What could Crypto climb to? Source: BTCUSD tradingview.com | Source: BTCUSD on TradingView.com
Bitcoin to Climb in Christmas and New Year
Analyzing past data on Bitcoin price movements from the second week of December to the first trading day of January shows that there has been a significant increase in volatility. Lower probabilityThere is a Santa Claus rally more in crypto than stocks.
Bitcoin has been seen positive in only four of these years, the last being last year. With far less data available than in the S&P 500, anything is still possible when it comes to speculative digital assets.
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It is possible to make more money by using seasonal data that are related to today’s date. The Winter solstice is also today. This date has always been close to a peak, bottom or break of an all-time high.
Source: BTCUSD on TradingView.com| Source: BTCUSD on TradingView.com
With this Winter solstice having failed to produce the peak of a rally, it could – like it has in the past – instead put in a short-term bottom that runs until the next equinox. This could be a Santa Claus rally.
Crypto trades at a low volume when compared with other markets, particularly during holidays. While institutional tax loss harvesting, and advanced short hedge positions may have kept Bitcoin’s price lower in December, it is possible that retail will push the prices higher soon.
However, according to the person who first mentioned a Santa Claus rally in The Stock Trader’s Almanac in 1972, Yale Hirsch, the rally itself isn’t what’s important. The important thing is the arrival of what happens next year.
“What’s important is not to catch this little rally but to use it as indication for what may happen in the coming year,” he said, calling it “an early indicator for the year to come.”
Hirsch’s father even came up with a phrase to help remember: “If Santa clause should fail to call, bears may come to Broad and Wall.”
It’s a dream I have of a green Christmas. Everything. #Christmas chart I draw. Which? #BitcoinThe possibility of tops is possible. Altcoin season seems likely. Then flip bear again and shorten it. pic.twitter.com/1wV6JYy4Vx
— Tony “The Bull” Spilotro (@tonyspilotroBTC) December 15, 2021
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