Christmas Season in the Crypto Market: Why the Santa Rally Remains an Illusion

ZkProofPudding · 2026-01-15T21:03:14+00:00

The Santa Rally, a phenomenon of rising stock prices during the year's end, contrasts sharply with the cryptocurrency market, which exhibits inconsistent trends. While traditional markets experience a notable rally, cryptocurrencies show mixed, often negative outcomes, suggesting a need for cautious investor expectations.

ZkProofPudding

2026-01-15 21:03:14

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The so-called Santa Rally – the phenomenon of rising prices in the last week of December and the first days of January – has long been established in traditional stock markets. However, in the crypto market, the reality tells a completely different story.

The Established Pattern in Stock Indices

The Santa Rally phenomenon was first documented and popularized by analyst Yale Hirsch in the 1970s. The period typically includes the final five trading days of a year and the first two trading days of the new year. Several factors explain this recurring pattern: optimistic year-end sentiment, reduced trading volumes due to absent institutional actors, and the so-called window dressing, where asset managers cosmetically optimize their holdings at year-end.

The Kobeissi Letter recently confirmed this trend with new record highs in the S&P 500. Even Barchart, which recorded two consecutive negative Santa Rallies in the stock market, emphasizes: historically, there have never been three negative years in a row.

The Crypto Market Follows Its Own Rules

In the crypto market, the situation is fundamentally different. The available data systematically disprove the Santa Rally narrative:

2020: +34.5% (extraordinary exception)
2021: -7.9% (significant losses)
2022: -1.5% (negative development)
2023: +4.9% (weak gains)
2024: +1.7% (marginally positive)

Crypto analyst Ardi convincingly argues that the performance of the 2020s has disproportionately shaped confidence in this pattern. Since then, the year-end dynamics in the crypto market resemble a coin toss with decreasing success rates.

Professional Market Participants Exploit Naivety

A critical aspect: large investors deliberately use the holidays to sell overvalued positions to optimistic retail investors. This pattern is particularly evident in the weakening of 2021 and explains the generally lackluster results after 2020.

The Santa Rally phenomenon remains an enticing Christmas story – but for the crypto market, it is a fragile narrative that regularly fails to hold up against reality. Investors should consistently temper their expectations and be aware: the market follows its own unpredictable patterns even during the holiday season.

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