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Happy holidays! Welcome back to the last installment of Distributed Ledger of 2023. This is Frances Yue, crypto and markets reporter at MarketWatch.
Historically, stocks tend to see a so-called “Santa Claus rally,” which refers to a phenomenon where U.S. equities rise over the last five trading days of the current year and the first three trading days of the new year.
During the past 75 years, the S&P 500
SPX
closed higher 78% of the time during the Santa Claus trading window, and rose during the time for the past seven years, according to Dow Jones Market Data.
However, it was not the case for bitcoin
BTCUSD,
The crypto only rose in six out of 13 Santa Claus periods since 2010. To be sure, bitcoin is trading every day, unlike stocks, so the Santa Claus trading windows differ slightly for the two assets.
I chatted with Victoria Bills, chief investment strategist at Banrion Capital, who said bitcoin may not see a Santa Claus rally this year and explained why.
Find me on X at @FrancesYue_ to share any thoughts on crypto or this newsletter.
An upcoming ETF?
Crypto market participants are expecting the U.S. Securities and Exchange Commission to approve a spot bitcoin ETF as early as next week.
However, a lot of hype around the ETFs is already priced in, which explains why bitcoin has been trading sideways for the past few days, Bills said in a call.
Excitement around bitcoin ETFs drove the crypto up over 157% so far this year, while the crypto is still down over 37% from its all-time high in 2021.
Analysts at QCP Capital echoed the point. It is likely that the actual demand for the bitcoin ETF would fall short of market expectations at the beginning, setting up “a classic sell the news scenario” in the second week of January, the analysts said in a recent note.
They expect bitcoin to see topside resistance in the $45,000 to $48,500 range, and a possible retracement to $36,000, before its uptrend continues.
Bitcoin’s rise is likely to resume once the ETFs arrive on the market, as it could start driving institutional inflow to the space, Bills noted.
“With the emergence of the new spot ETFs, we’re going to have increased liquidity into the market, and further accessibility for people who have always been interested in getting involved in bitcoin, but have been afraid to participate in the market that they view as unregulated,” Bills said.
Meanwhile, Grayscale Investments, whose application to convert its bitcoin trust into a spot exchange-traded fund is pending the SEC’s approval, said in a Tuesday regulatory filing that Barry Silbert had resigned as chairman and would be replaced by Mark Shifke.
In the new year, crypto traders will also start positioning for the bitcoin halving expected in April, when block rewards given to crypto miners will be cut in half. Historically, bitcoin has seen price appreciation take hold months after halvings.
Crypto in a snap
Bitcoin fell 1.3% in the past seven days and traded at slightly above $43,000 on Wednesday, according to CoinDesk data. Ether
ETHUSD,
rose 1.8% during the same period, to about $2,349.
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