Santa Claus Rally: Should I Buy High Tech Stocks or Crypto? (Op-Ed)

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As a seasoned analyst with over two decades of experience navigating the volatile world of financial markets, I have come to understand that the stock market is as predictable as a rollercoaster ride during the holidays. The recent dip in both tech stocks and cryptocurrencies, including Bitcoin, is not uncommon at this time of year.

Although the Federal Reserve reduced interest rates by a further quarter point last Wednesday, the value of Bitcoin significantly dropped.

Over the past month ending December 24th, I’ve noticed a significant decline in my crypto investments, with some assets dipping as much as 15% at one point. However, it’s crucial to remember that a key indicator for the well-being of the Web3 blockchain economy has also dropped by 3.5% over the same period.

However, it wasn’t only Bitcoin and cryptocurrencies that experienced a downturn; tech stocks in the NASDAQ Composite dropped by 3% over the last five trading days on Wall Street. This leads one to wonder if there will be a year-end rally, often referred to as the Santa Claus rally, to offset the market’s current Grinch-like behavior and bring some holiday cheer?

How High-Tech Nasdaq Stocks Do In Santa Rallies

It’s quite possible that the recent drop in stock and cryptocurrency prices during the past week can be attributed, at least partly, to the markets taking a pause for a breather. They had reached unprecedented peaks in the early part of the month.

According to Dominic Pappalardo, the current chief multi-asset strategist at Morningstar Investment Management, the high valuations of various risk assets leave very little wiggle room for mistakes. Essentially, he’s suggesting that the market’s intense responses today are primarily due to the exceptionally expensive nature of these risk assets.

Following the Fed’s revised forecast indicating fewer rate cuts in the future after their latest cut in December, there seems to be a decrease in market excitement about further reductions. In other words, Pappalardo suggested that the recent trend in equity markets can be linked to the Fed’s expectation of less rate cuts in 2025.

There will probably be a Santa Claus rally this year.

Data from 1950 to present indicates that the U.S. stock market tends to experience a seasonal boost in approximately 79% of the years. Typically, the increase during this period averages about 1.3%.

Keep in mind that fluctuations in NASDAQ tend to be greater than the average movement within the broader U.S. stock market. Additionally, the volatility of stocks, especially those post-pandemic, has been significantly higher compared to many other periods in history.

How Cryptos Like Bitcoin Do on Holiday Pumps

For cryptocurrency savers, investors, and day traders comparing high-tech stocks with Bitcoin and altcoins, it’s worth noting that historically, crypto also gets a Santa bump around the holidays.

Additionally, it’s worth noting that the surge in crypto related to Santa Claus (a period of increased investment) was frequently greater than stock market gains during this timeframe. But keep in mind, during times when Krampus (a figure symbolizing a market downturn) arrives, losses in altcoins may exceed those seen in stocks.

In the previous year, Bitcoin’s price experienced an uptick of approximately 4.87%, contrastingly, the NASDAQ Composite only rose by a modest 0.46% during the same period.

In the year preceding that, Bitcoin’s value dropped by approximately 0.61%, whereas NASDAQ experienced a modest 0.04% increase. Contrary to the traditional “Santa Rally” during the 2021 holiday season, we witnessed what could be called a “Krampus Slump.

In simpler terms, Bitcoin experienced a significantly larger drop compared to the NASDAQ. Whilst technology stocks in the NASDAQ declined by 0.59%, Bitcoin plummeted by 6.8%.

Bottom Line for Year-End Investors In 2024

As an analyst, I find myself observing a remarkable surge in both tech stocks and cryptocurrencies such as Bitcoin, which seems to be setting a strong foundation for further growth over the long haul. This upward trend has caught my attention, suggesting promising prospects for these asset classes.

From the final five days of December through the initial two of January, it’s common to see a surge in stock and cryptocurrency prices. Regardless of market direction, Bitcoin tends to experience even greater fluctuations.

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2024-12-24 16:04