Could we see a “Santa rally” in Bitcoin’s value this Christmas?

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According to Matrixport, a cryptocurrency service provider, Bitcoin could potentially reach $56,000 by year-end following Sir Isaac Newton’s third law of motion. Markus Thielen, head of research and strategy at Matrixport, has found that if Bitcoin records a price increase of at least 100% by May, there is a 71% chance or five in seven probability that it will finish the year with even higher prices. On average, these year-end rallies show an increase of 65%.

Thielen also indicates that Bitcoin usually reaches its peak around December 18th and refers to the weeks from early November to mid-December as the Bitcoin’s Santa Claus Rally period.

  • Bitcoin currently trades above $35,000 with a year-to-date increase of 114%.
  • An expected price rise of 65% implies Bitcoin may trade over $65,000 before this year ends.

Historical Performance Data Supports Potential Rally

Based on historical data from previous years (2010-2022), Thielen concludes that:
If Bitcoin increases by at least 100% by May, there is a 71% chance it will rally further by 65% or more until December 31st. He also notes that when Bitcoin has increased by at least 50% by the end of October in previous years’ analysis (13 years), there is an average probability of 78% that Bitcoin will continue to advance until year-end.

What’s Driving the Anticipated Market Rally?

The cryptocurrency community eagerly awaits Bitcoin’s Santa rally as it might be driven by factors such as increased institutional investment, regulatory clarity, and temporary improvement in microeconomic conditions.

  • Inflation in the US reduced significantly from a high of 9.1% in June 2022 to its current rate of 3.7%, with aggressive interest rate hikes by the Federal Reserve as the primary driver.
  • Despite reaching its highest level since 2001, these interest rates remain relatively moderate compared to historical rates.

Federal Reserve Approaching Interest Rates cautiously

Though the interest rate hike actions have successfully curbed inflation, concerns about a recession caused by prolonged elevated interest rates still linger. The Federal Reserve appears to be taking a cautious stance on managing inflation and exercising restraint when it comes to further interest rate increases.

Institutional Investment Boosts Crypto Markets

The entrance of institutional investors into the market has been made easier with the introduction of futures cryptocurrency ETFs and funds. Research shows that many institutions believe in the long-term value of blockchain technology and crypto assets, leading them to plan significant digital asset investments over the coming years.

Anticipation Around Approval of US-based Bitcoin Spot ETF

Approval of the first US-based Bitcoin spot exchange-traded fund (ETF) before January 10th could alter the economic landscape and boost momentum even further. Predictions by J.P. Morgan and recent speculation surrounding BlackRock’s ETF application approval have led Bitcoin’s price to surge to $35,000. The cryptocurrency market is expected to witness a notable price rise if this approval happens, though it might be temporary.

Regulatory Clarity Paves the Way for Crypto Growth

As cryptocurrencies gain global momentum, regulatory clarity becomes increasingly important. In 2021, US regulatory developments concerning crypto-assets were central to discussions worldwide, especially regulations implemented by the SEC (Securities and Exchange Commission). Various countries have developed legislative frameworks and rules governing ICOs (Initial Coin Offerings), DeFi (Decentralized Finance) platforms, and cryptocurrencies in general.

This year, the European Union has implemented the Markets in Crypto-Assets regulatory framework, providing comprehensive crypto regulations for the region. A US Circuit Judge has affirmed Ripple’s compliance with XRP sales on public exchanges calling it a legal victory for the cryptocurrency sector. Regardless of the final outcomes of these cases, they are expected to bring increased regulatory clarity and shape how cryptocurrencies are regulated in the US going forward. Significant developments in these proceedings by year-end could potentially spark another price surge in the cryptocurrency market, fueling excitement among the community as they await further updates.


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