Bitcoin Cracks $50,000 Barrier in Possible Sign of ‘Santa Claus Rally’ in Risk Assets

OPINION: This article contains commentary which may reflect the author's opinion

Earlier in the week, Bitcoin crossed the $50,000 hurdle and traded just below $51,000 as stocks and other risk assets moved higher in what may be a signal of a year-end “Santa Claus Rally.”

Two weeks ago, Bitcoin was stuck below the psychological barrier of $50,000, but Thursday’s rally broke through it. On Christmas Eve, bitcoin was at $50,929 as of 7:38 a.m. Eastern time.

The market appetite for risk appeared to be boosted on Thursday, despite concerns about Omicron and the Federal Reserve’s plan to wind down stimulus sooner than forecast.

On positive economic data, such as U.S. weekly jobless claims running at pre-pandemic levels and studies suggesting that Omicron has a lower risk of hospitalization, Asian equity markets edged higher.

After a recent multi-day rally in global equity markets, European shares opened mostly flat on Friday in light holiday trading. On Friday, international stock markets are closed for Christmas in a number of countries, including Germany and the United States, while French and British markets will see shortened trading sessions.

The pan-European STOXX 600 index was flat at 7:30 a.m. EDT, after gaining over 4 percent during a four-day rally starting Dec. 20. The FTSE 100 in London rose 0.2 percent on Friday, while the CAC 40 in France fell 0.15 percent. The FTSE gained approximately 3.65 percent since Dec. 20, and the CAC 40 gained approximately 4.68 percent.

In a tweet, LPL Research noted that equity strength this time of year is commonly known as the Santa Claus Rally, a term coined by Yale Hirsch, the creator of the Stock Trader’s Almanac.

In order to qualify for the Santa Claus Rally, a given year normally ends on the last day of November and begins on the first day of December the following year.

In a note, analysts at LPL Research said that “there isn’t a single seven-day combo out of the full year that is more likely to be higher than the 78.9 percent of the time higher we’ve seen previously during the Santa Claus Rally.”

“Whether optimism over a coming new year, holiday spending, traders on vacation, institutions squaring up their books—or the holiday spirit—the bottom line is that bulls tend to believe in Santa,” LPL Financial Chief Market Strategist Ryan Detrick said in a statement.

According to Stephane Ekolo, strategist at Tradition in London, the thin volumes are not conducive to reading too much into market movements.

Inflation and central bank policies are among the uncertainties affecting the upward trend, Ekolo said.

With inflation and Omicron still looming as headwinds for sentiment, consumer confidence rose to its highest level since November in December.

According to Bankrate’s December Financial Security Index, 2/3 of U.S. adults aren’t optimistic about their personal finances in 2022, with more than half blaming inflation for their negative outlook.

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