The holiday season is often marked by a sustained increase in the stock market, a phenomenon known as the Santa Claus rally. This year, cryptocurrencies like Bitcoin are expected to see similar trends, with several factors contributing to a potential surge in Bitcoin’s price.
Firstly, the Federal Reserve’s decision to cut interest rates again in December could play a pivotal role in Bitcoin’s performance. Historically, Bitcoin has thrived in low-interest-rate regimes. After the financial crisis of 2008, when rates were near 0%, Bitcoin’s value climbed from nil to $20,000 per BTC by Christmas 2017. The subsequent increase in rates in 2018 led to a collapse in Bitcoin’s price, a period referred to as the “crypto winter.”
However, the Fed’s decision to revert to a zero-interest-rate policy in response to the Covid-19 pandemic in 2020 led to record prices for Bitcoin and other cryptocurrencies. With another rate cut on the horizon, Bitcoin’s value is expected to continue its upward trajectory, with daily exchange volume increasing alongside higher prices.
Secondly, Bitcoin’s supply cycle is also expected to boost its price. Bitcoin’s core programming includes a 50% reduction in daily new supplies every four years, a feature that strengthens the cryptocurrency’s buying power over time.
A decrease in the availability of Bitcoins on crypto exchanges also contributes to a more robust price support for the cryptocurrency. According to data from CoinGlass, 30-day crypto exchange outflows reached 58,440 BTC on December 3rd, increasing drastically to 116,259 BTC by December 7th. This significant drop in exchange liquidity reflects the long-term confidence of Bitcoin holders.
Another factor is the typical end-of-year sales bump. Like other markets, the cryptocurrency market usually sees a surge in revenue in the final months of the year. Bitcoin’s total dollar increase in November was higher than any other month in its history, hinting at a potential strong Santa Claus rally if market sentiment remains consistent through the new year.
Lastly, the political landscape could also favor Bitcoin’s growth. Donald Trump’s pro-crypto stance and his push for accommodating regulations for blockchain innovation could further bolster Bitcoin’s price. As Bitcoin’s price hovered around a historic high of $100,000 amid the announcement of pro-crypto nominations for Trump’s second administration, it is clear that political support can significantly impact the cryptocurrency market.
In conclusion, several factors are aligning in favor of Bitcoin this December, making it a potentially good time to invest in the cryptocurrency. However, as with any investment, potential buyers should carefully consider their financial circumstances and risk tolerance before making a decision.
