Why Has Bitcoin’s Santa Rally Failed to Materialize?

Bitcoin’s Q4 Struggles: A Break from Tradition

As 2024 winds down, Bitcoin (BTC) is falling short of its typical end-of-year performance, diverging from the usual “Santa rally” that often characterizes its December price movements.

Historically, Bitcoin has seen an average increase of 2.8% in the 51st week, but this year it is headed for an 11% decline. Likewise, while Bitcoin generally gains around 3% in the 52nd week, it has experienced losses in five of the last six years, suggesting little potential for a year-end rally this time. The Santa rally, which typically kicks in as December shifts into January, seems unlikely to happen in 2024.

This trend is also evident in the broader performance of Bitcoin throughout Q4. The fourth quarter has traditionally been one of Bitcoin’s strongest, with an average rise of 85% since 2013, according to Coinglass data. However, in 2024, Bitcoin’s rise has been less than half that figure, indicating weaker-than-expected growth.

The current downturn bears some resemblance to the beginning of 2021, although it’s occurring slightly later than the usual timing for a Santa rally. On January 8, 2021, Bitcoin was priced around $40,000. By January 27, it had dropped to $30,000, a 25% decline that was larger than the current 15% drop. However, that decline took place within a broader bull run that began at $10,000 in December 2020 and peaked at $70,000 by November 2021.

A key similarity between the two periods is the rising realized price—the average price at which Bitcoin holders have acquired their coins. This suggests that, on average, investors are purchasing Bitcoin at higher prices, which reflects positive long-term sentiment. Additionally, Bitcoin’s price continues to stay ahead of the short-term holder’s realized price (STH RP), which tracks the average price of coins moved within the past 155 days.

Between December 2020 and April 2021, Bitcoin remained above the STH RP, often using it as support in the bull market—a trend typical of upward price movements. Currently, with the STH RP at $84,000, as long as Bitcoin stays above this level, it suggests that the broader bull market may still be intact.