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

A visual representation of the digital cryptocurrency Bitcoin in London, England, on Dec. 7, 2017. Dan Kitwood/Getty Images

Bitcoin broke through the $50,000 barrier on Thursday and was trading just below the $51,000 mark Friday as the cryptocurrency’s solid leg up followed stocks and other risk assets upward in what may signal a year-end “Santa Claus Rally.”

The world’s leading cryptocurrency had been stuck below the psychological barrier of $50,000 for two weeks when Thursday’s rally cracked that ceiling. Bitcoin was trading at $50,929 as of 7:38 a.m. New York time on Christmas Eve.

Investor appetite for risk firmed on Thursday, as markets appeared to shrug off Omicron concerns and worries that a faster wind-down of stimulus by the Federal Reserve would hobble the tailwind that has helped lift risk assets like crypto and stocks.

Most Asian equity markets edged higher and the S&P 500 closed at a record high overnight on positive economic data, such as U.S. weekly jobless claims running at pre-pandemic levels, and as some studies suggested that Omicron has a lower risk of hospitalization.

European shares opened mostly flat in light holiday trading on Friday, following a recent multi-day rally in global equities. Stock markets in several countries including Germany and the United States are closed on Friday for Christmas, while bourses in France and the UK will see shorter trading sessions.

The pan-European STOXX 600 was flat as of 7:30 a.m. New York time, after adding over 4 percent in a four-day rally starting Dec. 20. London’s FTSE added 0.2 percent Friday, while France’s CAC 40 was down 0.15 percent. Since Dec. 20, the FTSE has gained around 3.65 percent and the CAC 40 around 4.68 percent.

“Equity strength this time of year is widely known as the Santa Claus Rally, a term discovered in 1972 by Yale Hirsch, creator of the Stock Trader’s Almanac,” LPL Research said in a tweet.

The Santa Claus Rally normally refers to a seven-day period spanning the last five days of a given year and the first two of the following.

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.

Stephane Ekolo, strategist at Tradition in London, told Reuters he would not read too much in market moves going into year end given the thin volumes.

Ekolo said the upward trend was clouded by uncertainties ranging from inflation to central bank policy.

Confidence among U.S. consumers rose to its highest level in five months in December as Americans appeared to brush off concerns about inflation and the spread of Omicron, though both factors loom large as headwinds for sentiment going forward.

Two-thirds of U.S. adults don’t expect their personal finances to improve in 2022, with more than half of this group blaming inflation for the pessimistic view of their future money situation, according to Bankrate’s December Financial Security Index.

Reuters contributed to this report.