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Is A Santa Claus Rally Planned For Bitcoin In 2022?

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2022-12-23
Is A Santa Claus Rally Planned For Bitcoin In 2022?

An end-of-year rally refers to a period of increased Bitcoin market activity and performance, typically occurring in the final weeks of the calendar year. Many investors and analysts pay close attention to the possibility of an end-of-year rally in the Bitcoin market, as it can potentially provide an opportunity to generate significant returns on investments. Let's take a closer look and dive into the subject matter.

What ingredients does Santa need for Bitcoin to rally?

One factor that may contribute to the likelihood of an end-of-year rally in the Bitcoin market is the overall sentiment and perception of Bitcoin. If there is a general feeling of optimism and excitement about the future potential of Bitcoin, investors may be more likely to invest in it, leading to increased demand and potentially higher prices. On the other hand, if there is negative sentiment or uncertainty about the future of Bitcoin, investors may be more hesitant to invest, leading to lower demand and potentially lower prices.

Another factor that may impact the likelihood of an end-of-year rally in the Bitcoin market is the performance of Bitcoin throughout the year. If Bitcoin has been performing poorly for most of the year, investors may be more likely to try to "make up for lost ground" by investing heavily in the final weeks of the year in the hopes of generating returns. On the other hand, if Bitcoin has been performing well throughout the year, investors may be more likely to take a "wait and see" approach, leading to potentially lower demand and less of a rally.

Additionally, the actions of central banks and government policies can also impact the likelihood of an end-of-year rally in the Bitcoin market. If central banks and governments take actions that are perceived as supportive of Bitcoin and the cryptocurrency market, it can increase investor confidence and potentially lead to increased demand for Bitcoin. On the other hand, if central banks and governments take actions that are perceived as detrimental to Bitcoin and the cryptocurrency market, it can decrease investor confidence and potentially lead to lower demand for Bitcoin.

A recap of the past decade

It is worth noting that Bitcoin's performance during end-of-year periods has been mixed in the past. In some years, Bitcoin has seen significant price increases during the final weeks of the year, potentially due to increased demand from investors looking to generate returns. In other years, Bitcoin has seen relatively flat or declining prices during this period, potentially due to lower demand or negative sentiment.


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An overview of the festive season from the last decade.


After its inception, Bitcoin rallied to $7 during the holiday season after an overall red month in December 2011. The festive season in 2012 sparked not just a green month but a major bull market, rallying Bitcoin up to 2012, where it found its peak right at its festive season, after which a deep crypto winter ensued that lasted well into 2014 and 2015. However, the Christmas period of 2015 was one of a sideways market, after which yet another major bull market broke out. The two Christmases that followed in 2016 and 2017 were merry and bright, although the tranquil snow at the top melted down rapidly right after the festivities and resulted in yet another bear market. Little did we know at the end of 2018 that this would turn out to be the absolute bottom of the bear market for years to come. Yet at the time, the holiday season was a controlled sideways market. Since then, we have seen price action in 2019 and 2020 that is very similar to that of 2015 and 2016. 2021 marked the end of Bitcoin's biggest bullrun to date, and by December, a strong downtrending market was in full force.

As can be seen in Figure 1, most end-of-year seasons turned out to be big turning points overall and gave green price action as a result. One could say that within crypto, Santa Claus does tend to treat investors on a jolly christmas. However, when analyzing the markets, a more bearish outlook must also be considered. While we have had multi-year bear markets in crypto, it is important to realize that Bitcoin has been in a continuous bull market for over a decade, correlated to the global markets that have been in a similar runup for nearly a decade.

Investors are seeking to invest elsewhere for the time being, and with an overall negative outlook on financial markets as a whole, the market has a 50% chance of trading sideways over the holiday season, and a 25/25 chance to rally or continue to trend downwards. This roughly translates to a 25% chance that this holiday season will be something to celebrate in the crypto world.

In conclusion, the likelihood of an end-of-year rally in the Bitcoin market is influenced by a number of factors, including the overall sentiment and perception of Bitcoin, the performance of Bitcoin throughout the year, and the actions of central banks and governments. Even though a past performance at the end of the year can give some context, it is hard to know for sure if there will be a rally at the end of the year. Investors should carefully consider all relevant factors when making investment decisions.

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