James Trescothick

With more than 20 years of experience in financial service industry, James is our Senior Global Strategist and the co-producer and presenter of easyMarkets educational videos. When he is not working on educational programs or preparing webinars, you can find him with the easyMarkets team giving seminars around the world.

As I sip my overpriced latte cursing the fact that despite my best attentions I now have jingle bell rock stuck in my head I force my mind to think of other things other than how sick I am of Christmas music already.  Not that I don’t like this time of year, I enjoy it as much as the next person, it’s just that they start playing that festive background music so early.  Now something that may have come early this year, is a potential “Santa rally” for those that trade bitcoin.

Before we cover that and ask the question will there be more gifts to come, let’s talk about what actually is the so called “Santa rally”.

 

The Santa Rally

Not unlike its name sake, there are those who believe in the Santa rally and those who don’t.  The supposed “Santa rally” tends to occur in the last week of December when the market can see a sudden surge in stock prices.  Many have tried to explain this burst of activity in the market.  Some have put it down to the general cheer of the season, others have said its down to tax considerations and individual investing their Christmas bonuses.  Is it real?  Well, Wall Street certainly hopes you believe it is and there are many traders who believe it to be true and there are others who think it is just a myth like the jolly man dressed in red and that it’s just another saying in line with the infamous “Sell in May and go away”.

However, according Stock Market Almanac, December is one of the best months of the year for shares with the FTSE in particular rising 74% of the time in December since 1970.

But as any analyst worth their weight in gold (which isn’t much have you seen gold prices lately?) would tell you, past performance never guarantees future results.

 

Come ole ye faithful, Bitcoin is here

Bitcoin is far too young to give any hint of a potential “Santa rally” affect though you could look back in December 2015 where it started the month at around $360 per coin and closed the month out at $418 per coin.  It did something similar last December too opening the month at $725.40 and starting January at $955.90 per coin.  On the flip side of the coin (pun intended) you could look back at the end of 2013 where in November of that year it went on its first impressive bull run hitting $1087 only for it to collapse in December to the low of $384 before closing the month out at $670 due to Chinese regulators intervention.

However, this year no one seems to be talking about anything else apart from Bitcoin.  And with only seven days into December, Santa certainly has come early for Bitcoin traders. On the 1st December, Bitcoin was around $9867 per coin and at the time of writing it is at an incredible $16,526, which is an increase of more than 40%.

Now one of the reasons that many are saying is behind this latest bull run is we are only days away from both the CBOE and the CME launching their bitcoin future contracts.  CBOE went live first on the 10th December with CME following on the 17th December.   The fact that these two exchanges have accepted Bitcoin has given further evidence that legitimizing bitcoin as an investment could be just around the corner.

 

So when both these two exchanges go live with their bitcoin future contracts it could shower the bitcoin market with more gifts pushing it higher to close out a record breaking year.  However, could the crypto market react in the same way as the forex market sometime does and that is “buy the rumour and sell the fact” and drops when this happens?  Also how will the bitcoin market react with the opportunity for future traders to short their bitcoin contracts on these exchanges?



At the end of the day what has happened to bitcoin in 2017 no one really could have predicted or really grasp and how it will bow the year out only time will tell.  But Decembers’ run so far is nothing short of spectacular and I have never seen anything like it.

I tend to feel that eventually this bubble will bust as I feel that the recent rush into the market has been by those looking to profit and not to use bitcoin for what it was designed for and that when the time comes to cash out there may be issues with getting it exchanged back to a physical currency and maybe even the banks accepting the transfer.

For now, let bitcoin enjoy its run and let’s just hope for those bitcoin traders out there that when it comes to the final week of December the crypto market is not overly stuffed on its own in indulgence.

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