The "Santa Claus Rally" for US stocks and Bitcoin is coming, and historical data provides a rare consensus signal

Written by: White55, Mars Finance

When the S&P 500 index shows a seasonal upward trend at the end of the year, Bitcoin also follows a similar rhythm, with historical data providing rare double bullish signals.

As December progresses past the halfway point, Wall Street’s attention gradually shifts to the most anticipated seasonal phenomenon of the year—the “Santa Claus Rally.”

Since 1950, the S&P 500 has a 79% probability of recording positive returns during the short seven-day window of the last five trading days of December and the first two trading days of January, with an average gain of 1.3%.

This seasonal pattern has been repeatedly validated over the past 75 years, making the last two weeks of December the best-performing two weeks in the stock market.

On the other hand, Bitcoin quickly rebounded after dropping to $87,500 on December 15th, rising above $89,500. Last week, Bitcoin spot ETF net inflows reached $286 million.

Michael Saylor, co-founder of MicroStrategy, reiterated his determination to “continue accumulating Bitcoin,” and the company will also maintain its status as a component of the Nasdaq 100 index.

Definition and Historical Performance of the Santa Claus Rally

The “Santa Claus Rally” was first proposed by Yale Hirsch, founder of the Stock Trader’s Almanac, in 1972. It refers to the phenomenon of U.S. stocks rising during the last five trading days of each year and the first two trading days of the following year.

This seasonal pattern is highly regarded on Wall Street, not only because of its high success rate but also because of its predictive power for the stock market in the following year.

Historical data shows that since 1950, the S&P 500 has averaged a 1.3% increase during this seven-day window, with a 77% probability of gains.

The frequency of positive returns is 78% for the S&P 500, 79% for the Dow Jones Industrial Average, and 75% for the Nasdaq.

This seasonal trend is not coincidental.

Multiple factors contribute to this phenomenon: optimistic investor sentiment during the holiday season, increased holiday spending, lower year-end trading volumes making the market more susceptible to bullish retail investors, and notably, the Santa Claus Rally has shown remarkable predictive ability for the next year’s stock market performance. Since 1994, over 29 years, the S&P 500 has risen during the Santa Claus Rally period 23 times, with 18 of those years also seeing gains in the following year; during the six years when the rally was negative, the stock market also declined in the following year.

In other words, over the past 29 years, the Santa Claus Rally successfully predicted the next year’s trend in the U.S. stock market 24 times, with an accuracy rate approaching 80%.

The strongest Santa Claus Rally occurred during the 2008 global financial crisis, when the S&P 500 surged 7.4% over seven days, successfully foreshadowing the market rebound in the following year.

In 2009, after hitting a bottom on March 9th, the S&P 500 rebounded sharply, ending the year with a 23% increase, with a total gain of 67% from the lowest point to the end of the year.

Bitcoin’s December Seasonal Pattern

Similar to the U.S. stock market, Bitcoin also exhibits a clear seasonal pattern, with December often being one of the strongest months in Bitcoin’s history.

Analyzing data from 2015 to 2024, Bitcoin closed with a positive monthly return in seven out of ten years, with an average monthly return of 4.3%.

This seasonal phenomenon is supported by multiple factors: holiday optimism boosting risk appetite, year-end bonuses flowing into cryptocurrency investments, tax-loss harvesting creating buying opportunities, and reduced institutional selling pressure during holidays.

In late December, retail traders gradually dominate trading volume, further reinforcing this trend.

Bitcoin’s best December performances include a 46% surge in 2017 and a 36% increase in 2020, while the worst year was 2021, with a 19% decline.

This indicates that even during overall bear markets, December remains a relatively strong month for Bitcoin.

However, December 2025 presents a more complex situation. Bitcoin experienced a sharp correction in November, dropping from $116,000 to around $80,000.

On December 15th, Bitcoin briefly fell below $88,000, with an intraday decline of 2.43%.

The Fear and Greed Index dropped to 17, indicating “Extreme Fear,” remaining in the fear zone for over 60 days, approaching the most panic-stricken levels seen during the 2022 bear market.

If Bitcoin can regain support in the $95,000 to $97,000 range, it could reshape the market structure. Conversely, maintaining above $84,000 could allow for an orderly correction and prevent further sell-offs.

Correlation and Future Outlook of U.S. Stocks and Bitcoin

Historically, there has been a subtle correlation between U.S. stocks and Bitcoin. When traditional financial markets face uncertainty, the cryptocurrency market often also feels the impact.

In December 2025, both markets face the key influence of Federal Reserve monetary policy.

The Fed’s interest rate policy serves as a link between U.S. stocks and the cryptocurrency market.

Although the Fed has already implemented rate cuts at the December FOMC meeting, Chairman Powell’s stance on whether to continue rate cuts in January remains unclear.

According to CME’s “FedWatch” tool, the market’s probability of a 25 basis point rate cut in January has fallen to 24.4%.

This monetary policy uncertainty has affected both markets.

Jeff Park, head of Bitwise Alpha Strategy, pointed out that the core reason Bitcoin has struggled to rally recently is due to native holders continuously selling options, suppressing prices and implied volatility.

While ETFs are buying spot and demand bullish options, the effort is still insufficient to hedge against selling pressure from the native market.

In the long term, both cryptocurrencies and gold will benefit from de-globalization and de-dollarization, leading to increased monetization.

Cryptocurrencies offer good privacy and inflation resistance, have grown rapidly since inception, and are gradually becoming formalized assets. Potential regulatory relaxation under the Trump administration also provides a potential positive outlook for the crypto market.

For the remaining trading days in 2025, I am optimistic that the year-end rally will not be absent.