Historically, Bitcoin witnesses a surge in price known as the Santa Claus rally in the days leading up to Christmas, only to see those gains wiped out in the subsequent week. This trend has been observed in recent years, starting from 2021, although the year prior did not adhere to this cycle.
This trend of price downturns post-Christmas extends beyond Bitcoin to other major altcoins like Ethereum and Dogecoin. The question that arises is whether this trend will persist into the year 2024.
Relationship Between Exchange Flows and Price Movements of Major Cryptocurrencies
An analysis by CryptoCrypto focused on the movement of Bitcoin and Ethereum to and from exchanges during the Christmas period. A 7-day moving average was used to smoothen the data. In 2023, BTC recorded an inflow of 1,481 BTC on 22 December, while ETH saw an inflow of 32,805 over the same period. However, a few days later, the trend reversed.
Exchange netflows for BTC and ETH hit -5,915 and -9,626 respectively on 26 and 27 December, indicating an accumulation phase. Despite this, price movements were relatively stable for BTC and saw a 10% increase for ETH leading into the year-end. These metrics suggest that traders preferred to seize profits by sending tokens to exchanges and then accumulating more in the subsequent week.
In 2024, the cryptocurrency market experienced a Santa Claus rally, propelling BTC to $99.6k, ETH to $3,560, and DOGE to $0.342 with gains ranging from 6% to 9% in the three days before Christmas. Currently, exchange netflows are on an upward trend, hinting at potential selling pressure. Notably, BTC and ETH prices have already dipped by 5% and 6% respectively, with Dogecoin seeing a steeper decline of around 9%.
Muted Sentiment in Open Interest before the Festive Period
The Open Interest levels for Dogecoin, Ethereum, and Bitcoin were subdued leading up to the festive season. In 2023, there was a significant drop in OI from 22 to 25 December, followed by a swift recovery in the first half of January.
Similarly, in 2024, a notable decline in OI was observed on 17 December, likely triggered by bearish news from the Federal Reserve that caused a market-wide downturn with the Dow plummeting by 1,250 points. Despite this, OI remained mostly unchanged, hinting at a cautious stance from market participants. Traders are keeping an eye out for potential long entries, and a surge in OI and trading volume could lead to a repeat of the early 2024 gains during January 2025.