In a tradition that dates back about a century, investment bankers and traders keep a close eye on Wall Street for signs of a “Santa Claus rally,” whereby investors spread the holiday cheer by means of taking long positions on equity securities. The Santa Claus rally often trickles down to other markets beyond Wall Street; futures tend to get a boost along with the United States dollar, and even foreign exchanges get in on the action.
In recent years, cryptocurrency traders have been looking forward to benefiting from a Santa Claus rally, but this did not seem to be the case in 2019. There are two stages to this rally: The first one starts on Christmas Eve, and it usually involves a short trading session. The second and final stage may arrive when traders come back to work after Christmas. The rally may happen anytime between Christmas Eve and New Year’s Day.
Bitcoin traders were very hopeful on Monday 23 after seeing BTC/USD climb as high as $7,700 after a few weeks of being stuck closer to the $7,000 level. A 7% surge before Wall Street opened on Tuesday morning boosted these hopes even more; man traders hoped that a strong Santa Claus rally would push BTC past $8,000; alas, the Dow Jones Industrial Average added just 60 points before traders headed home to enjoy the holiday. While this is not disappointing for Wall Street, Bitcoin traders responded by raking profits and dumping long positions, thus driving BTC/USD back down to $7,200.
As previously mentioned, there are two stages to this rally, and it remains to be seen whether Wall Street investors will come back from their Christmas Day break happy, cheerful and invigorated. The Santa Claus rally could happen as late as the first trading day of the New Year, which will be Thursday, January 2 for 2020. With a lack of fundamental developments and no significant news headlines, Bitcoin traders mostly have Wall Street and technical analysis to guide their decision-making process before taking market positions. Should the Santa Claus rally fizzle, there is a strong potential for BTC/USD starting the year below the $7,000 level.
The most optimistic forecasts for the holidays included a return to the $10,000 BTC/USD level, which has become highly psychological for traders. As the situation stands, this would require an epic Santa Claus rally. At the Chicago Mercantile Exchange, Bitcoin futures were mostly gloomy and suggesting that BTC could fall below $7,000 over the next few weeks.
